Skip to Content

Check Point Software CEO Wary on IT Spending Amid Disappointing Outlook

Online CrimeOnline Crime

Network security provider Check Point Software Technologies disappointed the market on Wednesday with a second-quarter earnings forecast that fell short of expectations.

Chief Executive Gil Shwed said he was slightly cautious on the overall IT spending market even though the company was seeing healthy activity in the second quarter.

Shwed, speaking after Check Point reported stronger than expected first-quarter earnings, estimated the company would earn $1.02-$1.09 a share in the second quarter on revenue of $405-$435 million.

Analysts on average forecast that the Israel-based company would earn $1.09 a share on revenue of $427.7 million, according to Thomson Reuters.

Get Data Sheet, Fortune’s technology newsletter.

Shares in Check Point, one of the world’s leading providers of corporate security software, fell more than 4% in trading on Nasdaq.

Oppenheimer analyst Shaul Eyal said the company’s shift to a subscription revenue model was impacting the second quarter by $5-$10 million but said the company did not expect this to change the annual outlook.

Check Point maintained its full year 2016 forecast which predicts earnings per share of $4.45-$4.60 and revenue of $1.72-$1.79 billion.

In the first quarter, the company achieved strong growth from products to prevent cyber security threats as the market moves away from technology that simply detects network penetration.

“Unfortunately detection doesn’t solve the problem. Cyber security must be resolved differently,” Shwed said.

For more about cybersecurity funding, watch:

The company’s hardware and software combinations aimed at the high-end market and data centers have got off to a great start, Shwed said. He said the company was now launching products for small and medium-size businesses.

Check Point is also banking on mobile security to help drive growth, which so far contributes just a small amount to revenues. Last year, it acquired Israel’s Lacoon Mobile Security in addition to cyber security start-up Hyperwise.

The company earned $1.06 per diluted share, excluding one-time items, in the first quarter, up from 95 cents a year earlier. Revenue grew 9% to $404 million.

It was forecast to have earned $1.03 a share on revenue of $404 million, according to Thomson Reuters.