Revenues and earnings were not so pretty on a year-over-year basis, dropping 4% to $138 million for the former and 16% to $66 million -- when accounting for $9.3 million in stock options charges -- for the latter. One small positive of note was that deferred revenues were up 14% year over year to $177 million. The security market was characterized by CEO Gil Shwed as "challenging," which is no surprise, given that much of Check Point's markets are relatively mature. However, the heavy share buy-backs were $138 million for the quarter, which is equal to revenues. Of course, the company still has another $1.7 billion in cash to deploy for various shareholder-friendly initiatives, and I think it will do just that.
For one thing, the repurchases are having an impact, as the company has bought back about 11 million shares in the last year, reducing shares outstanding some 5%. The aborted Sourcefire acquisition was a blow to the company's growth plans, because it meant losing access to the lucrative open source intrusion detection systems market, which had deep penetration into defense and other military intelligence organizations in the U.S. However, the company still has the aforementioned $1.7 billion to seek out other acquisitions to spur growth -- similar to the smart deal it made to acquire Internet security leader ZoneAlarm.
With operating margins at a jaw-dropping 54% and a price-to-operating cash flow ratio of about 11, the business is too attractive to be valued this cheaply, even if growth continues to be a struggle. With RSA Security
Maybe it's a "growth" discount; or a "Microsoft
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