Symantec's Forecast Tops Analysts' Estimate as Security Spending Rises

Symantec Corp., the world’s largest maker of computer-security software, forecast higher sales than analysts predicted as companies accelerate spending on security programs.

Revenue in the fourth quarter, which ends April 1, will be $1.59 to $1.61 billion, Symantec said in a statement. Analysts projected $1.58 billion. Profit excluding some items will be 35 cents or 36 cents a share, compared with the 35-cent average of estimates compiled by Bloomberg.

Through acquisitions such as last year’s purchase of VeriSign Inc.’s security service, Symantec has added revenue from enterprise software for data centers and online networks. The new businesses helped make up for slower growth from PC- antivirus programs, said Steven Ashley, an analyst at Robert W. Baird in Milwaukee.

“They’re spending some money to develop new revenue streams,” Ashley, who has a “neutral” rating on Symantec and doesn’t own the shares, said in an interview. Businesses aren’t hiring new workers fast enough to step up growth in Symantec’s desktop-PC business, and the company hasn’t yet shown that new products can compensate for a slump in older lines of business, he said.

“We call that a show-me stock, and that’s where we’re at,” Ashley said.

Symantec rose as high as $18.45 in late trading after falling 3 cents to $17.80 at 4 p.m. New York time on the Nasdaq Stock Market. The shares lost 6.4 percent last year.

High-Profile Breaches

Net income in the third quarter ended Dec. 31 fell to $132 million, or 17 cents a share. Revenue increased 3.6 percent to $1.6 billion. Profit excluding some items was 35 cents a share, compared with the 33-cent average estimate of analysts.

Companies’ concerns about high-profile computer-security breaches and espionage, such as the Stuxnet attack and WikiLeaks’ document leaks, are boosting Symantec’s sales, Chief Executive Officer Enrique Salem said in an interview.

“Some of these big events are raising awareness of the need to protect your data,” he said.

The company is also developing more software to secure smartphones and mobile-computing devices, Salem said. Such software still constitutes a small percentage of revenue, he said.

Acquisitions

Mountain View, California-based Symantec bought security companies GuardianEdge Technologies and PGP Corp. for $370 million in June. In August, it bought VeriSign’s security service for $1.28 billion.

Salem said the acquisitions will reduce fiscal 2011 earnings by less than the 11 cents a share the company had previously stated.

“It will definitely be less than 11 cents -- we’ve been more efficient,” he said today. “Because the top line is coming in stronger, it’s helping us spend less money.”

Citigroup analyst Walter Pritchard predicted in a Jan. 24 note to clients that the dilutive effect of Symantec’s acquisitions was abating, and wrote that sales to businesses are improving.

“Consensus estimates over the next six quarters are low,” said Pritchard, who recommends buying Symantec shares.

Competition

Symantec’s biggest rival, McAfee Inc., is being acquired by Intel Corp., the world’s largest chipmaker, for $6.6 billion. The companies won approval for the deal from the U.S. Federal Trade Commission in December, and received European Union approval today.

Symantec is winning enterprise contracts against McAfee, Salem said.

“We’re winning a lot of deals at the high end of the market,” he said. “McAfee has become very distracted.”

Another competitor, Russia’s Kaspersky Lab, has said it is planning acquisitions in the U.S. and Europe after selling 20 percent of its shares to private-equity group General Atlantic LLC.

Symantec has been working to gain a foothold in software to protect corporate data centers. The company’s $10.2 billion acquisition of storage-software company Veritas in 2005, intended to boost sales of products beyond desktop PCs, has disappointed some investors.

To contact the reporters on this story: Aaron Ricadela in San Francisco at aricadela@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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