Checkpoint Software Technologies is Back on Track

| About: Check Point (CHKP)

Check Point Software Technologies Ltd. (NASDAQ:CHKP), which makes information technology security hardware and software, has finally provided investors with some good news. After having the stock basically go nowhere over the last 2.5 years, Tuesday’s earnings report was an welcome change from the past few quarters of slow growth.

For the quarter that ended June 30, Check Point reported a net income of $69.5 million, or $0.31 cents per share, compared with $65.7 million, or $0.27 cents per share, in the same quarter last year. Check Point’s revenue for the quarter totaled $176.2 million, compared with $138.9 million in the same quarter, last year.

It experienced solid double-digit growth in both network and data security units, as well as doubling services revenue to $32.9 million. This has clearly become a strong growth driver for the company, and I would look for continued growth in this unit.

It also announced that it had bought back 2.1 million shares, and raised estimates for the rest of the year. The company is still sitting on lots of cash, and the question remains regarding what it plans to do with it. Is it going to make a purchase, keep buying back stock, pay a dividend, or is it going to be bought?

It has been mentioned as a takeover target but my answer to all these questions is that it is going to keep trying to grow the business, probably through acquisition. Gil Schwed believes that he can find the right acquisition, and the return on it will be more than the 1.5% dividend for investors. He’s probably correct. Much of this quarter’s strong growth is a result of previous acquisitions finally coming home to roost.

Stockerblog likes Checkpoint as a way to secure your portfolio, and I think he is right on. It appears that the company is back on track producing strong growth, and that should put a smile on investors' faces.

Disclosure: The author’s fund is long CHKP as of July 25, 2007.

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Tagged: , Security Software & Services, Earnings
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