Check Point Software Technologies has reported quarterly net profit that beat expectations and acquired Israel's Dome9 to strengthen its cloud security position but its fourth quarter outlook sent shares falling.
The networking vendor’s CEO Gil Shwed said the acquisition will reduce fourth quarter adjusted earnings by 2-4 cents a share.
For the fourth quarter, Israel-based Check Point forecast adjusted earnings per share of US$1.56-US$1.67 on revenue of US$520 million-US$528 million.
"Guidance for the fourth quarter was largely in line with expectations, while we would like to have seen this accelerate more," Edward Jones analyst David Heger said in a research note.
Jones expects growth to rebound into 2019 as the company's sales force, which has been transitioning with the shift to a more cloud-oriented focus, reaches full productivity.
Founded in 2011, Dome9 enables security and compliance for rapid public cloud adoption.
Full financial details of the acquisition were not disclosed, but Check Point said there was a cash payment of US$175 million as well as other components.
"They are going on the offensive with this cloud strategy," Daniel Ives, managing director of equity research at Wedbush Securities, told Reuters. "This is another great poker move by Check Point with cloud front and center."
Ives rates the shares a "buy".
Check Point earned US$1.38 per diluted share excluding one-time items in the third quarter, up from US$1.30 a year earlier. Revenue grew four per cent to US$471 million - it was forecast to earn US$1.36 a share on revenue of US$466 million, according to data from Refinitiv.
"Third quarter results reached the top end of our projections, with better than anticipated strength coming from the U.S. and Europe," Shwed said.
The company maintained its full year estimate for EPS excluding items of US$5.45-US$5.75 and revenue of US$1.85-US$1.93 billion.
Dome9 has raised a little over US$25 million from investors including Japan's Softbank. It has just over 100 workers and annual sales of several million dollars.
"Dome9 is not just a feature for us. It is a platform for everything we will do," Shwed told a news conference.
(Reporting by Tova Cohen and Ari Rabinovitch; Editing by Adrian Croft and Alexandra Hudson)