Earnings Preview: McAfee

| About: McAfee Inc. (MFE)

McAfee (MFE) is expected to report Q1 earnings after the market close on Thursday, April 29, with a conference call scheduled for 4:30 pm ET.


The consensus estimate is 63c for EPS and $513.12M for revenue, according to First Call. Guidance provided by management on its last earnings call was for Q1 EPS of 60c-64c on revenue of $500M-$520M. Upside option activity was heavy across several strikes this week. Traders have been buying up calls in McAfee ahead of its earnings report and amid rumors that the company might be a takeover target. In addition to the buyout talk -- which involved Hewlett-Packard (NYSE:HPQ) as the possible suitor -- technical analysts may believe that the stock is ready to break above the $42 level that has served as resistance going back to November of last year.

Analyst Views

RBC Capital's recent checks with partners, distributors and value-added-resellers, or VAR's, across North America and EMEA appear to be tracking in-line to slightly above consensus revenue estimates vs. RBC's $515.0M and the mid-point of guidance at $510M. With strength being driven primarily by big deals, which RBC expects will be up dramatically year-over-year, in the enterprise segment from Intrushield, ToPS migration, Secure Computing and compliance while interest in DLP remains high. RBC believes the quarter was fairly back-end loaded and did pick up some discounting in the channel as the security space remains competitive with several smaller vendors offering some aggressive pricing. The firm believes Q1 revenue will have a 2%-3% year-over-year forex tailwind but a slight quarter-over-quarter headwind of approximately 2%. Deferred revenue could see a approximately 2% quarter-over-quarter headwind or as much as $23M. On the earnings line, RBC believes there could be slight upside to consensus and its EPS estimate of 63c.

On the earnings call RBC will look to get an update on the search for a new CFO, commentary on the company's new stock buyback plan, and an update on the recent anti-virus interruptions/complications which could include rebates or reimbursements. Consensus for Q2 is 66c on $526.17M in revenue.

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