This is the second quarter in a row that Symantec has missed its targets, raising questions again about the wisdom of the company’s $13.5bn merger with Veritas Software in 2005.

The company warned that its December quarter revenue will miss even the low end of targets, coming in at between $1.29bn and $1.31bn, compared to its earlier estimate of $1.315bn to $1.345bn.

In a conference call with analysts, chief executive John Thompson laid the blame squarely with the Veritas side of the house, specifically the part now known as the data center management software group.

While the December quarter is the strongest for maintenance contract renewals in that segment, the company overestimated how many new licenses it could up-sell along with those renewals.

I think what we’ve now seen in this quarter is rather than large numbers of new licenses added as part of the renewal process, we’re seeing renewals occur with fewer or less new license content, Thompson said.

Maintenance revenue is recognized over the term of the contract, rather than all at once, so it is pushed onto the balance sheet as deferred revenue and doesn’t show up immediately in quarterly reports.

The company now expects deferred revenue at the end of March to be $2.60bn to $2.65bn, compared to prior guidance of $2.4bn to $2.6bn and compared to $2.16bn in fiscal year 2006.

Higher than expected expenses from changes in how Symantec runs its business, along with costs from implementing a new ERP system, also hurt the bottom line in the third quarter.

Symantec said it now sees third-quarter earnings per share coming in at $0.10 to $0.11, compared to its earlier target of between $0.14 and $0.15.

The company still hasn’t figured out whether the ERP and business process changes cost it revenue. Executives said they think it did not impact the top line, but left the question open.

There was a period during the quarter when we were unable to take orders from certain parts of business, what we would call the flow business, things that flow through the channel, because we had to turn the system off to re-coordinate the activity, Thompson said.

We are still in an analysis of whether or not we actually lost revenue during that period of time, he added. There’s nothing we’ve seen so far to indicate that was the case. However, the analysis is not complete at this point.

Regardless, the sales weakness and unexpected costs arguably point to continued chafing as Symantec and Veritas attempt to smoothly slide ever closer together.

The merger, which was announced in late 2004 and closed in July 2005, was greeted with broad skepticism by analysts and investors alike, many of whom could not see the security-storage synergies that Symantec expected.

Indeed, two years on the direct points of integration between Veritas’s storage management products and Symantec’s security products have been few, and largely incidental.

The company’s strategy instead has been to play into the perceived need for companies to securely store large amounts of data in order to comply with corporate policies or government regulations.

Today, for example, Symantec will announce updates to its Security Information Management software that optimize it to work with very large file-level data stores in the multi-terabyte range. While there will be no direct integration of Veritas products, the incidental synergies are clear.

It seems that at some level Symantec’s current problems may be size-related in a more general sense, rather than specific to the Veritas integration. Thompson indicated as much yesterday, when asked whether Symantec’s miss and other recent misses, such as SAP’s, could be related.

I don’t think there is a macro challenge, he said. I think that those of us that have a very large installed base are being challenged at renewal time.

The company also expects its current fourth fiscal quarter to come in below previous Wall Street expectations, with revenue estimated at between $1.24bn and $1.27bn.

As a result of the third-quarter miss, which was announced before the markets opened in New York yesterday, its share price tanked, closing down 13.13%.

After a few good years riding a tiger economy for consumer security software, Symantec’s shares were riding high at around $32 in December 2004, but fell to $25 following the Veritas merger news. They haven’t seen $25 since, and closed at $17.79 yesterday.

While the consumer business isn’t growing as fast as it once did, it did perform to expectations in the December quarter, according to Thompson. He added that he doesn’t see any impact from the release of Windows Vista in the immediate future.

The company will announce its finalized quarterly performance a week from today.