Shares of Internet security company McAfee Inc. (NYSE: MFE) have been tumbling after the company reported yesterday after the market closed that its first-quarter profit slipped 27%, hurt by higher expenses related to product development and marketing. The world's second-largest security software maker also slashed its full year earnings guidance, prompting investors to pull the stock down in morning trading.

McAfee said its profit dropped during the first quarter to $31.6 million, or 19 cents per share, compared with $43.4 million, or 27 cents per share reported in the same period a year ago. Excluding one-time items, the company's earnings would have come at 43 cents per share, missing analysts' predictions for a profit of 45 cents per share in the quarter.

The second-biggest maker of security software did post a respectable growth of 17% for its first-quarter revenue which jumped to $370 million. This was above analysts' predictions for quarterly revenue of $352 million, according to Reuters Estimates. However, McAfee's operating costs during this period also increased to $226 million.


Looking ahead, the Internet security company didn't show worries about a further economic slowdown and forecast second-quarter revenue above analysts' expectations. McAfee expects second-quarter sales in a range between $360 million and $375 million, while analysts were waiting for $356.9 million in revenue.

On the other side of the coin, the company was not too confident over its full year earnings, and slashed its outlook. McAfee now expects earnings between $1.15 and $1.25 per share, compared with previous forecast of $1.25 to $1.35 per share.

McAfee had a good past year as its shares have been generally moving higher. So far today though, investors have showed disappointment about the company's weaker-than-expected earnings and its full-year earnings outlook, and its shares are down 4.46% to $34.04 in morning trading.

Eliza Popescu is a financial writer for the online investment advisory service Investor's Observer.