Internet security company Symantec (NASDAQ:SYMC) reported its earnings for fiscal Q3 2005 and the first nine months of fiscal 2005 yesterday. But Wall Street was underwhelmed. Strong as Symantec's numbers were, the company seems to be suffering from the same curse that felledeBay (NASDAQ:EBAY), Qualcomm (NASDAQ:QCOM), and Yahoo! (NASDAQ:YHOO) last night. Having trained the Street to expect its expectations to be blown completely out of the water, any failure to do so -- or to do so by a wide enough margin -- sparks a sell-off.

In Symantec's case, the sell-off was relatively restrained. After-hours trading saw the company's stock fall just a couple of percentage points. But was even that justified?

Not to this Fool's mind. On the contrary, not only is Symantec's business firing on all cylinders -- revenues rose 41% quarter-on-quarter and earnings per share just a bit less than that at 38% -- but also the company appears to be holding true to its word and finally putting a lid on the stock options cookie jar. When we last checked in on Symantec six months ago, the company was running a bit behind schedule on this front. It had just come off a year of considerable stock dilution, and perhaps old habits die hard, but fiscal Q1 2004 had Symantec clocking in at 5.1% annual stock dilution. Six months later, the company has dialed that back to about 3.4%.

What's more, Symantec's earnings release did not mention the company making any stock buybacks. Granted, the company didn't release a cash flow statement with its earnings announcement, so it's hard to be sure whether it spent money to buy back its stock. But it appears that Symantec may no longer be doling out stock options like mad with one hand and buying them back with wads of cash with the other in a frantic attempt to mask the dilution. Once Symantec files its 10-Q, we'll be able to confirm that the company's holding the line on dilution.

Now where Symantec becomes "better than its word" is on earnings. Back in July, the company predicted GAAP profits of $1.48 (which equates to $0.74 post-stock-split). Yesterday, it raised that estimate by more than 8% to $0.80.

Put all that together and I really don't see why Wall Street punished the company even as mildly as it did yesterday. More profits and less dilution? That's a recipe for investing success.

Yesterday's good news aside, Symantec is poised to engage in a bit of "good" dilution as part of an anticipated merger with Veritas (NASDAQ:VRTS). Read about that in:

Fool contributor Rich Smith has no position in any of the companies mentioned in this article.