Veritas Profit Warning Pummels Shares

Shares of Veritas Software Corp. on Tuesday tumbled 36% after the company said that second-quarter sales and profit would miss forecasts because of weakened demand for data storage products.

Its report was followed by profit warnings from at least four other software firms, including FileNet Corp. of Costa Mesa.

Veritas, of Mountain View, Calif., said quarterly sales were $475 million to $485 million, based on preliminary data. That fell short of its previous forecast of at least $490 million.

Profit was 17 cents to 19 cents a share, the company said, compared with analysts’ average estimate of about 22 cents.

Investors slammed the stock down $9.55 to $17 on Nasdaq. The price had topped $40 in January.

Veritas, which restated its 2001 to 2003 results last month to fix accounting errors, said second-quarter results were hurt by slack demand from U.S. businesses. Orders failed to materialize at the end of the quarter, and sales of new software licenses missed expectations, Chief Executive Gary Bloom said.

Veritas had indicated in mid-June that results were on track.

“They reaffirmed guidance three weeks ago, and came and slapped you in the face” Tuesday, said David Rudow, an analyst at Piper Jaffray Cos. in Minneapolis.

Veritas is the world’s No. 2 maker of data-storage software. It has benefited as companies have purchased more software to help back up and archive data, and move it around networks.

But the company has faced rising competition for back-up programs after EMC Corp., the industry leader, bought Legato Systems Inc., said Kaushik Roy, a Susquehanna Financial Group analyst in Boston. Analysts estimate Veritas gets half its sales from those programs.

Last week, another player in the data-storage business -- Costa Mesa-based Emulex Corp., which makes chips for the industry -- warned of disappointing results because of “tepid” demand in the second quarter. Its stock is down 20% since its announcement.

The software sector’s woes didn’t end with Veritas on Tuesday: After regular trading ended, four smaller firms said recent results would fall short.

FileNet, which makes software for document management, said profit in the second quarter would be 3 cents to 5 cents a share. Analysts had expected 12 cents.

The company said that a “significant” number of potential sales didn’t close as expected before the quarter ended. FileNet fell $1.73 to $27.93 on Nasdaq before the announcement.

Other software companies warning of shortfalls were Ascential Software Corp., JDA Software Group Inc. and Kana Software Inc.

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Bloomberg News and Reuters were used in compiling this report.