UPDATE: McAfee 2Q Net Jumps 38% On Strong North American Revenue Growth

McAfee Inc.'s (MFE) second-quarter profit jumped 38% as the antivirus-software maker posted strong revenue growth in North America, although margins fell slightly.

The results mark a sharp improvement over the first quarter, when McAfee's profit dropped despite an increase in revenue, as the security-software maker was hit by currency fluctuations and delays in deal closings.

"It's a good quarter when you consider the speed bump last quarter," said Daniel H. Ives, an analyst with the investment bank FBR Capital Markets. "It feels like they are back on the road to growth. From an investor perspective this gives you confidence."

The company, which reported mixed results compared to its weak April estimates, sees third-quarter earnings of 62 cents to 66 cents a share on revenue of $505 million to $520 million. Analysts surveyed by Thomson Reuters projected 64 cents and $523 million, respectively.

Also Thursday, McAfee announced its acquisition of privately owned tenCube, which makes a security service for mobile devices. This follows on the company's May acquisition of the privately owned Trust Digital, another mobile security-software firm.

Financial details were not announced for either deal, which come as mobile security grows in importance. In March, data tracker IDC forecast worldwide mobile-security license and maintenance revenue would more than double, to $2.7 billion by 2014 from $1.3 billion in 2009.

The tenCube acquisition "highlights the knotty problem of mobile security," said Don More, a partner at the investment bank Updata Advisors Inc. Mobile security, he added, "is more complicated than desktop security but could potentially represent a bigger market."

Meanwhile, earlier this month, the company released its first security products for consumers who use Apple Inc.'s (AAPL) Macintosh computers. Macs have been less inviting as virus targets than personal computers that use Microsoft Corp.'s (MSFT) Windows software, but that could change as usage grows.

McAfee posted a profit of $39.4 million, or 25 cents a share, up from $28.7 million, or 18 cents a share, a year earlier. Excluding stock-based compensation and other costs, earnings climbed to 63 cents a share from 60 cents.

Revenue grew 4.4% to $489.2 million, as it climbed 8% in North America. Internationally, revenue was flat, but up 2% in constant currency terms.

In April, McAfee projected a profit of 58 cents to 62 cents a share on revenue of $500 million to $520 million, a view that missed Wall Street's then expectations.

Gross margin narrowed to 73.3% from 75.4% as costs grew.

During the quarter, McAfee closed 30 deals worth more than $1 million each, compared with 28 a year earlier.

Shares rose 0.8% to $30.50 in after-hours trading. At the close, stock is down 25% this year.

Shares in Symantec Corp. (SYMC), McAfee's close competitor, fell more than 11% to 13.03 on Thursday, and are down more than 27% this year. On Wednesday, Symantec announced quarterly results that missed analyst expectations, and on Thursday several analyst firms downgraded the stock to "market perform" from "outperform." Standard & Poor's maintained its "hold" rating for the Mountain View, Calif.-based company.

"We think the IT spending environment has weakened given the economic uncertainty," wrote analyst Jim Yin in a research note. "We also believe Symantec is losing market share due to increased competition."

-By Jeanette Borzo, Dow Jones Newswires; 415 765 8230; jeanette.borzo@dowjones.com

(John Kell contributed to this article.)

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