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Tuesday January 29, 4:10 pm Eastern Time

Press Release

SOURCE: VERITAS Software Corporation

VERITAS Software Reports Fourth Quarter Results; $374 Million Revenue For the Quarter
Strong Q4 Momentum Leads to Increased Q1 Revenue Outlook

MOUNTAIN VIEW, Calif., Jan. 29 /PRNewswire-FirstCall/ -- VERITAS Software Corporation (Nasdaq: VRTS - news), today announced financial results for its fourth quarter and year ended December 31, 2001. The Company achieved fourth-quarter revenue of $374 million compared with revenue of $370 million reported for the fourth quarter of 2000. Pro forma net income for the fourth quarter, excluding amortization of goodwill and other purchase accounting adjustments and a one time stock-based compensation charge, was $64 million, compared with $84 million for the same period last year. Diluted pro forma net income per share for the fourth quarter was $0.15, compared with $0.19 for the same period last year.

For the 12-month period ended December 31, 2001, VERITAS Software had revenue of $1.5 billion, compared with revenue of $1.2 billion, for the year ended December 31, 2000, a 24% year-over-year increase. Pro forma net income for the 12-month period ended December 31, 2001, excluding purchase accounting adjustments, the one time stock-based compensation charge, and the loss on strategic investments reported in the third quarter was $282 million compared with $263 million last year. Pro forma diluted net income per share was $0.67, compared with $0.60 for the same period the prior year.

``We are a unique player in the technology industry having grown revenue 24% in this extremely tough economic environment,`` said Gary Bloom, chairman and chief executive officer, VERITAS Software. ``Growing the business at this rate over the past year and the increased interest in VERITAS storage software and disaster recovery solutions has allowed us to strengthen the company during the economic downturn. With our improved capacity and momentum, we are increasing our Q1 2002 revenue projection to a range of $365 million - $370 million, which compares favorably to current Wall Street consensus analyst estimates of approximately $355 million.``

``Our balance sheet ended the year in stellar condition with $1.7 billion in cash and investments, representing an increase of $439 million during the year and an increase in pro forma earnings per share of 12% over the prior year,`` said Ken Lonchar, executive vice president and chief financial officer, VERITAS Software. ``Our strong financial position provides us the investment power necessary to lead the value shift from hardware to software that is well underway in the storage market.``

For the fourth quarter, on an as-reported basis including the non-cash charges for purchase accounting adjustments for acquisitions and the one time stock-based compensation charge, VERITAS Software reported a net loss of $204 million, or $0.51 per share, compared with a net loss of $125 million, or $0.31 per share for the same period last year. Purchase accounting amortization amounted to $238 million in the current quarter and $235 million in last year`s fourth quarter. The one time stock-based compensation charge related to the acceleration of certain stock option vesting in the current quarter, amounted to $9 million. The Company`s as-reported net loss for the 12-month period ended December 31, 2001 was $651 million, or $1.63 per share, compared with $620 million or $1.55 per share for the same period last year.

The Company includes a financial table with this earnings release: ``Pro Forma Statements of Operations.`` The pro forma statements of operations are intended to present the Company`s operating results excluding purchase accounting adjustments, the one time stock-based compensation charge in the fourth quarter of 2001 and the loss on strategic investments in the third quarter of 2001. Purchase accounting adjustments include amortization of developed technology, amortization of goodwill and intangibles, acquisition and restructuring costs, and related adjustments for income tax provisions. These measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from pro forma measures used by other companies.

The Company will hold a conference call on Tuesday, January 29 at 2:00 p.m. Pacific Time, 5:00 p.m. Eastern Time, to review the results. The conference call will be available to all investors. The telephone dial-in number for listen-only access to the live call is 913-981-4900. A live web cast will also be available at www.veritas.com. In addition, a telephonic replay will be available until February 5, 2002 by dialing 719-457-0820, replay code: 510169.

About VERITAS Software

VERITAS Software Corporation provides essential storage software solutions that enable customers to protect and access their business-critical data. The company`s corporate headquarters is located at 350 Ellis Street, Mountain View, CA 94043. 650-527-8000, fax: [phone], e-mail: [e-mail], Web site: www.veritas.com.

This press release includes forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. For example, the projections about revenue are forward-looking statements. Such forward-looking statements involve a number of risks and uncertainties, including the risk that our products and services will not gain market acceptance domestically or internationally; the risk that we lose market share to existing or new competitors, the risk of a continued or worsening decline in economic conditions generally and in IT spending specifically, the risk that we may not be able to manage our expenses to adjust to changing market conditions, the risk that we will not be able to manage our growth, and the risk that anticipated disaster recovery investments will not occur or will not result in increased demand for our products. These factors and others could cause the actual results we achieve to differ materially from what is projected in the forward-looking statements. For more information regarding potential risks, see the ``Factors That May Affect Future Results`` section of our most recent report on Form 10-Q on file with the SEC. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date hereof.

NOTE: VERITAS, VERITAS Software, the VERITAS logo, Business Without Interruption and other product names are trademarks or registered trademarks of VERITAS Software Corporation in the US and other countries. Other product names mentioned herein may be trademarks and/or registered trademarks of their respective companies.


VERITAS SOFTWARE CORPORATION
PRO FORMA STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)


Three Months Ended Twelve Months Ended
December 31, December 31,
2001 2000 2001 2000
Net revenue:
User license fees $267,689 $301,271 $1,110,400 $987,363
Services 106,757 68,810 381,941 219,965
Total net revenue 374,446 370,081 1,492,341 1,207,328
Cost of revenue:
User license fees 12,604 11,532 40,902 40,779
Services 38,447 25,797 138,430 85,968
Total cost of revenue 51,051 37,329 179,332 126,747
Gross profit 323,395 332,752 1,313,009 1,080,581
Operating expenses:
Selling and marketing 136,103 133,206 563,283 443,834
Research and development 63,455 55,255 241,197 175,901
General and
administrative 32,716 24,929 116,793 77,900
Total operating
expenses 232,274 213,390 921,273 697,635
Income from operations 91,121 119,362 391,736 382,946
Interest and other income,
net 13,379 19,931 64,916 59,619
Interest expense (7,535) (8,253) (29,381) (31,567)
Income before income taxes 96,965 131,040 427,271 410,998
Provision for income taxes 32,968 47,174 145,272 147,959
Pro forma net income $63,997 $83,866 $281,999 $263,039
Pro forma net income per
share - basic $0.16 $0.21 $0.71 $0.66
Pro forma net income per
share - diluted $0.15 $0.19 $0.67 $0.60
Shares used in per share
calculation - basic 402,684 401,209 399,016 400,034
Shares used in per share
calculation - diluted 418,489 434,305 420,206 436,801


The pro forma statements of operations are intended to present the
Company`s operating results excluding purchase accounting adjustments,
loss on strategic investments, and stock-based compensation. Purchase
accounting adjustments would include amortization of developed technology,
amortization of goodwill and intangibles, acquisition and restructuring
costs, and related adjustments for income tax provisions.


VERITAS SOFTWARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except per share data)


Three Months Ended Twelve Months Ended
December 31, December 31,
2001 2000 2001 2000
(Unaudited)

Net revenue:
User license
fees $267,689 $301,271 $1,110,400 $987,363
Services 106,757 68,810 381,941 219,965
Total net
revenue 374,446 370,081 1,492,341 1,207,328
Cost of revenue:
User license
fees 12,604 11,532 40,902 40,779
Services 38,447 25,797 138,430 85,968
Amortization of
developed
technology 15,791 15,553 63,086 62,054
Total cost
of revenue 66,842 52,882 242,418 188,801
Gross profit 307,604 317,199 1,249,923 1,018,527
Operating
expenses:
Selling and
marketing 136,103 133,206 563,283 443,834
Research and
development 63,455 55,255 241,197 175,901
General and
administrative 32,716 24,929 116,793 77,900
Amortization of
goodwill and
other
intangibles 221,881 219,757 886,651 879,032
Stock-based
compensation 8,949 -- 8,949 --
Acquisition and
restructuring
costs -- (4,260) (5,000) (4,260)
Total
operating
expenses 463,104 428,887 1,811,873 1,572,407
Loss from
operations (155,500) (111,688) (561,950) (553,880)
Interest and
other income,
net 13,379 19,931 64,916 59,619
Interest expense (7,535) (8,253) (29,381) (31,567)
Loss on strategic
investments -- -- (16,074) --
Loss before
income taxes (149,656) (100,010) (542,489) (525,828)
Provision for
income taxes 54,646 24,952 108,873 93,964
Net loss $(204,302) $(124,962) $(651,362) $(619,792)
Net loss per
share - basic $(0.51) $(0.31) $(1.63) $(1.55)
Net loss per
share - diluted $(0.51) $(0.31) $(1.63) $(1.55)
Shares used in
per share
calculation -
basic 402,684 401,209 399,016 400,034
Shares used in
per share
calculation -
diluted 402,684 401,209 399,016 400,034


VERITAS SOFTWARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)


December 31, December 31,
2001 2000

ASSETS

Current assets:
Cash and short-term investments $1,694,860 $1,119,449
Accounts receivable, net 176,635 186,863
Deferred income taxes 124,527 38,017
Other current assets 66,466 38,303
Total current assets 2,062,488 1,382,632
Long-term investments -- 136,111
Property and equipment 225,763 168,389
Goodwill and other intangibles 1,412,536 2,285,320
Other non-current assets 52,451 110,382
Deferred income taxes 45,375 --
Total assets $3,798,613 $4,082,834

LIABILITIES AND
STOCKHOLDERS` EQUITY

Current liabilities:
Accounts payable $32,244 $45,250
Accrued compensation and
benefits 89,637 63,838
Accrued acquisition and
restructuring costs 12,093 44,123
Other accrued liabilities 80,833 69,289
Income taxes payable 63,735 34,454
Deferred revenue 239,110 201,001
Total current liabilities 517,652 457,955
Non-current liabilities:
Convertible subordinated notes 444,408 429,176
Deferred and other income taxes 113,100 213,132
Total non-current liabilities 557,508 642,308
Stockholders` equity 2,723,453 2,982,571
Total liabilities and
stockholders` equity $3,798,613 $4,082,834

SOURCE: VERITAS Software Corporation



-----------------------------------------------


Tuesday January 29, 4:22 pm Eastern Time

Veritas Software net loss XXXXX

MOUNTAIN VIEW, Calif., Jan 29 (Reuters) - Veritas Software Corp. (NasdaqNM:VRTS - news) on Tuesday said its year-over-year fourth-quarter net loss grew and that its pro forma profit -- excluding certain items -- declined less than Wall Street had expected.

The Mountain View, California-based storage management software maker`s net loss was $204.3 million, or 51 cents per diluted share, vs. the net loss in the same year-ago quarter of $125 million, or 31 cents a share.

Excluding charges, the company had pro forma earnings that fell to $$64 million, or 15 cents per diluted share, compared with pro forma earnings of $83.9 million, or 19 cents a share, last year.

Twenty-eight analysts polled by tracking firm Thomson Financial/First Call had forecast that the company would earn 12 cents to 16 cents a share. Their consensus estimate was for earnings of 13 cents.

Revenue inched higher to $374.4 million from $370.1 million last year. Analysts` consensus forecast was for revenue of $358.1 million.

[siscoinvestor]

Wednesday January 30 10:28 AM ET

Veritas Stock Off After Disappointing View

NEW YORK (Reuters) - Shares of Veritas Software Corp. on Wednesday (Nasdaq:VRTS - news) tumbled more than 7 percent after investors were disappointed with the company`s outlook despite a strong fourth-quarter performance and boosting its forecast.

Shares of the Mountain View, California-based storage-management software maker fell to $42.73, down $3.42, and were among the top net losers in early morning trading on the Nasdaq stock market.

After the close of the market Tuesday, Veritas reported better-than-expected fourth quarter operating profits, but analysts said the company`s raised guidance for its first quarter and 2002 full year revenues was less aggressive than investors had hoped for.

``Although the results of the quarter were strong and we are raising forward estimates, we believe many investors may be disappointed by the company`s forward-looking comments for revenue and revenue growth, specifically for the first quarter of 2002.`` ABN AMRO analyst George Godfrey wrote in a research note.

Despite that, Godfrey reiterated a ``buy`` rating on the shares as well as a 12-month price target of $60.

For the fourth quarter, pro forma earnings -- excluding purchase accounting adjustments such as amortization of goodwill and a one-time charge of about $9 million related to stock-based compensation for Veritas` recently retired chairman and chief executive -- fell to $64 million, or 15 cents per diluted share, from $83.9 million, or 19 cents, last year.

The results came in ahead of 28 analysts` consensus estimate for earnings of 13 cents, according to tracking firm Thomson Financial/First Call.

Including all charges, Veritas` fourth-quarter net loss expanded to $204.3 million from $125 million in the year-ago quarter.

``In general, the results were quite good,`` Doug van Dorsten, an analyst of Thomas Weisel Partners, said after the company`s earnings call.

Goldman Sachs analyst Tom Berquist said investors expected more aggressive guidance but Veritas was conservative with its first-quarter forecast of earnings of 13 cents a share on revenue of $365 million to $370 million.

Investors responded immediately, pushing the stock down to $43 in after-hours trading, from its close of $46.15.

The company`s outlook matched analysts` average per-share earnings estimate and was more optimistic than their revenue forecast of $355 million. The guidance, however, paled when compared with Veritas` first-quarter 2001 earnings of 21 cents on revenue of $387.4 million.

Veritas said it expected 2002 revenue to grow to between $1.63 billion and $1.7 billion from $1.5 billion in 2001.

-----------------------------------------------------------


Wednesday January 30, 2:23 pm Eastern Time

Press Release

SOURCE: VERITAS Software Corporation

Companies Worldwide Choose VERITAS to Manage Increasing Demand for Storage
VERITAS Software Deepens Global Reach With Storage Management Solutions

MOUNTAIN VIEW, Calif., Jan. 30 /PRNewswire-FirstCall/ -- VERITAS Software Corporation (Nasdaq: VRTS - news) today announced companies who chose VERITAS Software`s heterogeneous storage management solutions during the fourth quarter of 2001. Spanning globally across all geographic regions and product lines, VERITAS Software gained new customers in the following sectors: government, telecommunications, technology, financial services, pharmaceutical, transportation and retail. These customers turned to VERITAS Software to implement disaster recovery and storage management solutions to maximize the utilization of existing hardware and provide continuous access and protection for business-critical information.

VERITAS Software customers from the fourth quarter include Baxter Bioscene AG, BEA Systems, Best Buy, BC Hydro, Chicago Board Options Exchange, Cingular, Computer Sciences Corp., Deutsche Bahn AG, Energis-ISION, Fannie Mae, Flughafen Wien (Airport Vienna), Glaxo Smith Kline, Hotwire, Iron Mountain Digital Services, Nestle, RBC Dain Rauscher, Rockwell Collins, Singapore Airlines, The Spiegel Group, Sprint, Synopsys, Inc., Syngenta, T-Systems (subsidiary of Deutsche TeleKom), TeleCheck Services, Inc., Tupperware, United Nations Organization, and Verizon Wireless.

``Storage customers care about getting the most out of their infrastructures -- performance, availability and manageability,`` said Steve Duplessie, founder, Enterprise Storage Group. ``The trick is to be able to optimize these environments without wholesale changes -- customers need to be able to more fully utilize the assets they already have. Companies like VERITAS understand and enable the customer to move forward while maintaining investment protection.``

``Our customers increasingly view storage software as a strategic asset,`` said Gary Bloom, chairman, president and chief executive officer, VERITAS Software. ``In addition to our advanced back up and recovery software, companies are asking us to help simplify the management of their storage environment and provide better utilization of their existing hardware. Our Storage Area Networking (SAN), virtualization, clustering and replication solutions help them achieve these objectives.``

About VERITAS Software

VERITAS Software Corporation provides essential storage software solutions that enable customers to protect and access their business-critical data. The company`s corporate headquarters is located at 350 Ellis Street, Mountain View, CA 94043. 650-527-8000, fax: [phone], e-mail: [e-mail], Web site: www.veritas.com.

This press release may include estimates and forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. These forward-looking statements involve a number of risks and uncertainties, including the risk that we will not gain market acceptance of our products and services, the risk that we will not be able to maintain the quality of our end-user customer and partnering relationships, and the risk that we will not manage our business effectively, that could cause the actual results we achieve to differ materially from such forward-looking statements. For more information regarding potential risks, see the ``Factors That May Affect Future Results`` section of our most recent report on Form 10-Q or Form 10-K on file with the SEC. We undertake no obligation to update any forward- looking statement to reflect events or circumstances after the date hereof.

NOTE: VERITAS, VERITAS SOFTWARE, the VERITAS logo, and all other VERITAS product names and slogans are trademarks or registered trademarks of VERITAS Software Corporation in the USA and/or other countries. Other product names and/or slogans mentioned herein may be trademarks or registered trademarks of their respective companies.

SOURCE: VERITAS Software Corporation

[siscoinvestor]

7:43AM Veritas Software upped by Morgan Stanley after recent price decline (VRTS) 40.15: Morgan Stanley upgrades to OUTPERFORM from Neutral with a $56 target; says nothing has changed since firm raised estimates in late January except the stock price.

In play by briefing.com

[siscoinvestor]

Sun May Have Something in Store for Veritas

By Aaron L. Task
Senior Writer
02/06/2002 07:23 AM EST


Sun Microsystems (SUNW:Nasdaq - news - commentary - research - analysis) promises the unveiling of new "end-to-end storage systems, software and services" at the company`s analyst meeting Wednesday in San Francisco. Predictably, Sun executives and representatives are keeping mum about what exactly that means in advance of the event.

Also predictably, their silence has market participants abuzz with speculation.


High on the rumor list is that Sun is going to signal a diminution, or even an end, to its long-standing relationship with Veritas (VRTS:Nasdaq - news - commentary - research - analysis). The scuttlebutt, which longtime Veritas watchers say isn`t new, is that Sun will dump Veritas for either its own storage software or for products provided by Legato (LGTO:Nasdaq - news - commentary - research - analysis), a much smaller participant in the storage software market.

Veritas` share of the storage software market stood at 40.8% at the end of 2001 vs. 53.7% for EMC (EMC:NYSE - news - commentary - research - analysis) and just 5.5% for Legato, according to A.G. Edwards.

The most recent evidence of Sun`s embrace of Legato is a Jan. 25 announcement that it was adding Legato to its Vendor Integration Program, a joint servicing setup the hardware maker has with some software sellers. At a Goldman Sachs conference late Monday, Legato Chairman and CEO David Wright said Legato is doing "exciting things" with Sun. These include "working on the developer side and support side," he said, noting that Sun "has really made a commitment more to the software management environment vs. hardware."

It`s possible Sun could announce some kind of joint software development effort with Legato, which would be a boon to a firm that lost 17 cents a share in 2001 and is still struggling to overcome past stumbles. But Wright`s comments didn`t generate much excitement; Legato shares rose just 0.03%, to $13.18, on Tuesday after losing 7.1% on Monday.

If Sun were to move away from Veritas, it will come as a big shock to the software developer, as well as to industry analysts, and would come after a rocky start to the week. Tuesday, Veritas fell 7% despite a Morgan Stanley upgrade, after falling nearly 6% on Monday.

"We don`t expect there to be a material change in our strategic partnership with Sun," said Kris Hagerman, senior vice president of strategic operations at Veritas. "I`m not all that concerned about Sun`s partnership efforts in the storage space, because in so many market segments we really have dominant presence and think customers are going to continue to vote with their wallets."

Industry analysts echoed Hagerman`s view, noting that Veritas` software is popular with information technology managers because it is compatible with the products of the majority of hardware vendors. Additionally, Sun has a long-standing relationship with Veritas, including cooperative sales and marketing efforts as well as the VOS Initiative , a joint alliance among Veritas, Oracle (SUNW:Nasdaq - news - commentary - research - analysis) and Sun.

"To move away [from Veritas] in a comprehensive way would be really difficult" for Sun, said Doug van Dorsten, who follows both Sun and Veritas for Thomas Weisel Partners, which hasn`t done underwriting for either company. "I`m not suggesting they can`t, but the logistics would be daunting."

A Sun spokeswoman, who declined to comment on Wednesday`s meeting, simply said "we have a strong relationship with [Veritas] ."

A Legato spokeswoman declined to comment.

Fire and Smoke
Hagerman noted that Sun accounted for less than 8% of Veritas` revenues in both the fourth quarter and all of 2001. Still, the question is whether Veritas shares -- which traded at 59 times expected 2002 earnings heading into Tuesday`s session -- can withstand any diminishment, perceived or actual, in the company`s relationship with Sun.

Even Vertias bulls concede that the storage software provider is increasingly finding itself at odds with storage hardware providers such as Sun and Hewlett-Packard (HWP:NYSE - news - commentary - research - analysis).

"As Veritas has become more powerful, the hardware companies recognize hardware is becoming increasingly commoditized and want to play in the software space," said James Mendelson of SoundView Technology Group, who has a strong buy recommendation on Veritas. "They`re on a collision course."

SoundView has not done underwriting for Veritas.

The pressures facing storage hardware manufacturers are similar to those experienced by PC makers in recent years, explained one veteran Silicon Valley venture capitalist who requested anonymity.

Gross margins at EMC, for example, fell to 40.1% in 2001 vs. 58% in 2000, he noted, despite a 9% revenue increase in its high-margin storage software business.

"In the enterprise space, the software guys and disc-drive [makers] are squeezing you," the VC continued. "So you add features and functionality to your box to add value to [your] claim Sun storage is better than [Hewlett-Packard`s] , which is better than Network Appliance`s, which is better than IBM`s," and so on.

The venture capitalist claimed no foreknowledge but "wouldn`t be surprised" if Sun were to make an announcement Wednesday similar to that made by EMC, which last fall announced it was "refresh [ing] its entire Symmetrix product line," including enhancements to its software.

"Everybody is doing this as they`re trying to figure out how to improve the value of storage," he said.

Certainly, it`s not unthinkable that Sun may announce something that`s viewed as being damaging to its Veritas relationship.

"Our take is they`re going to announce a bunch of developments [and] one will be software with embedded replication features" that would compete with Veritas` offerings, said Dan Niles, who follows Sun Microsystems at Lehman Brothers. Such a development might give some observers the impression Sun is migrating away from Veritas, he said, but "I don`t see them dropping Veritas. That`s not what we`re expecting."

Neil Herman, who follows Veritas at Lehman, seemed even less concerned: "I think the [Sun-Veritas] relationship will continue to move along similarly in the way it has been," he said.

Lehman hasn`t done underwriting for either firm.

SoundView`s Mendelson, who has a hold recommendation on Legato, said "it wouldn`t shock me" if Sun were to "cozy up to Legato more," noting the firm has improved its service and support. "People might say `they don`t like Veritas.`"

But "I don`t think it will be anything as dramatic as a break in the [Sun-Veritas] relationship, because I don`t think it would work to Sun`s benefit."

The question then is whether any kinks in the Sun-Veritas relationship -- perceived or otherwise -- are priced into Veritas` shares, which are down nearly 57% from their 52-week high but up 114% from their September lows.

[siscoinvestor]

Very Good, Says Veritas of First Quarter

By Ronna Abramson
Staff Reporter
02/27/2002 09:57 PM EST


Veritas Software (VRTS:Nasdaq - news - commentary - research - analysis) CFO Kenneth Lonchar gave an upbeat assessment of business for the first quarter.

Speaking at the Robertson Stephens technology conference on Wednesday, Lonchar said that when the storage-software company provided guidance in January, business was slightly ahead of expectations. Now that February is just about over, he said he was "slightly more positive" than he was in January.

In January, Veritas said revenue for the first quarter would range between $365 million and $370 million. Lonchar noted Wednesday that Veritas typically has drawn in 60% of its revenue for the quarter by its second month, in this case February. "We had a really good month (February)," he said.

Veritas already has signed three of the five largest deals Lonchar expected the company to seal this quarter, he said.

Lonchar also said he expects deferred revenue to grow by $15 million to $20 million -- three to four times the typical $5 million quarterly growth.

Going on the defensive, however, Lonchar also addressed rumors of Sun Microsystems (SUNW:Nasdaq - news - commentary - research - analysis) cutting off its alliance with Veritas. Sun launched what it called "end-to-end" storage offerings earlier this month, raising questions about its future with Veritas.

Lonchar downplayed what effect a defection by Sun would have on Veritas, rather than dismissing such a possibility.

Sun pays Veritas an average $20 million in royalties through their longstanding relationship, Lonchar said. But Sun enjoys a discount on Veritas products, he said.

So to make up the $20 million if Sun severs its ties, Veritas would have to sell a lot less than what Sun has been selling, he said. There`s a "good chance" of Veritas being able to do that, Lonchar said.

Shares of Veritas fell $2.31, or 6.1%, to close at $35.45 Wednesday. In after-hours trading, shares were down to $35.32.