WatchGuard Narrows Losses

Small security firm WatchGuard Technologies Inc. (Nasdaq: WGRD) registered decent growth last night, reporting net revenues of $23 million for the second quarter of 2004, up 15 percent on the same quarter last year and up 7 percent from the prior quater.

Product revenues were $16.1 million, up 22 percent from $13.1 million in the same period last year.

Investors weren't that impressed, though, and they sold shares like cheap suits in Havana. In late day trading today, the companys stock had fallen $0.42 (7.41%) to $5.25.

Company executives taking part in last night’s earnings call attributed the solid performance to strong demand for the company's FireBox X and SOHO products. Other factors contributing to the results included strong performance in Asia, and higher sales of add-ons, upgrades, and services, they said.

However, on a GAAP basis, WatchGuard reported a net loss of $200,000, or 1 cent per share in the second quarter, although this was a significant improvement on the same period last year, when the company recorded a net loss of $3.6 million, or 11 cents per share.Security vendors are reaping the financial benefit of threats such as viruses and worms, at a time when many other software firms are struggling (see Software Slump Is Deal Time). Earlier this week, for example, Symantec Corp. (Nasdaq: SYMC) raised its guidance for the next financial quarter, buoyed by strong performance of both its enterprise and consumer products (see Symantec Shows Off Strong Q1).

WatchGuard is currently planning to launch a new, low-end version of its flagship Firebox security appliance, according to execs on last night's earnings call.

Increasingly, vendors are launching scaled down versions of their security boxes. Earlier this week, Aventail Corp. took the wraps off its new EX-750, a scaled-down version of its EX-1500 SSL VPN device in an attempt to tap into the low-end SME market (see Aventail Scales Down SSL VPNs).

WatchGuard execs confirmed that the company will continue its strategy of upgrading users to higher-end models in the FireBox X range. Customers can either increase their port density or upgrade to a higher model in the line by activating a software license key.

However, they were more guarded about the company's plans for its high-end Vclass range of security appliances, which are aimed at medium-sized enterprises, data centers, and service providers. Nonetheless, one exec taking part in the call confirmed that enhancements to the product line are likely to be revealed towards the end of the year.— James Rogers, Site Editor, Next-gen Data Center Forum

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