Orange County Business Journal

Quest Software Cuts Sales and Profit Outlook, Shares Sink

Chris Casacchia Tuesday, July 12, 2011

Shares of Aliso Viejo-based Quest Software Inc. plummeted in afterhours New York trading after the company cut its sales and profit outlook in the June quarter and fiscal year.

Investors seized upon the tempered outlook, sending shares down more than 12% in aftermarket trading to a market value of about $1.7 billion.

Quest, which makes what’s known as middleware, or software that allows different computers and programs to work together, lowered its revenue outlook in the June quarter to between $201 million and $204 million.

The high-end sales of the revision was in line with analyst estimates.

The company said profits were expected to be in the range of $19.6 million to $21.4 million.

Analysts on average were expecting profits between $20.6 million and $27.7 million.

The growth rate for revenue was cut between 11% to 12%, with operating margins projected between 19% and 20%. That was below the previously announced guidance of 16% revenue growth and about 21% for operating margins.

The revised outlook was prompted by slower returns from recent acquisitions, according to Quest President and Chief Executive Doug Garn.

“We have adjusted our guidance to be consistent with our current expectations on the timing and magnitude of the returns on these investments,” he said.

Earlier this year Quest took a stake in Irvine security software startup SecureAuth Corp.

In May it bought Montana’s RemoteScan Corp., a software maker that tracks scanners and other imaging devices on corporate networks.

In the first quarter, Quest bought BakBone Software Inc., a San Diego-based data protection software maker for $55 million.

Quest will release the June quarter results on August 2.