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VERITAS to Miss Revenue Mark

Despite oodles of hype and promise around the utility computing space, VERITAS Software said it anticipates lower than expected revenues for its fiscal second quarter 2004 due to weak sales in the United States.

In announcing preliminary results for the second quarter Tuesday, company officials said they expected revenues between $475 million to $485 million on earnings per share (EPS) of 18 to 20 cents. Financial services firm SG Cowen expected revenues in the ballpark of $510 million and an EPS of 24 cents.

VERITAS, a maker of software that helps infrastructure in data centers operate more efficiently, said it expects license revenue, which is new software sales, of between $263 million to $273 million and services revenue of approximately $212 million.

The news caused the vendor's stock to spiral downward, dropping $9.57 a share to $16.98, a 36 percent dip. The company, which posted sales of $1.75 billion in 2003, will release its second quarter results on July 27.

"Our anticipated results were impacted primarily by weakness in our U.S. enterprise sales," said VERITAS chairman, president and CEO Gary Bloom in a statement. "As we have indicated previously, software license orders are generally concentrated in the later part of the third month of the quarter. At the end of the June quarter, our anticipated order flow weakened, contributing to lower-than-expected license revenues."

The news contrasts recent reports from research companies that say the economy is improving from its limping position of just two years ago. Other reports suggest the market for storage-related software and services to be strong, as well.

However, Bloom said the company's services business performed well on the strength of healthy maintenance renewals throughout the quarter. Demand for VERITAS' products and services was also strong in Europe and Asia Pacific.

Once just a strong player in the back-up and recovery and storage management software market, VERITAS is one of a number of companies, including IBM , HP and Computer Associates , to pin its hopes on utility computing or on-demand computing strategies.

While the competitors approach it in a different fashion, utility computing strategies are generally aimed at helping customers automate the resources in their data center -- including computing power -- and making them easier to provision.

Many of the companies have developed or procured some degree of virtualization technology, which allows resources to be pooled, to help consolidate machines and cut costs, allowing IT managers to spend time on other tasks to help the company.

One of VERITAS' strengths is playing to the notion of heterogeneity. For example, the company is largely platform-agnostic, making or supporting software that works on any platform or hardware.