Symantec Revenue Beats Estimates on PC Security Demand

Symantec Corp. (SYMC) is getting a boost as demand picks up for anti-hacking tools, with revenue and profit topping estimates in the latest quarter.

The biggest computer-security software maker reported sales of $1.74 billion in the fiscal first quarter that ended July 4, it said in a statement yesterday. Analysts were projecting, on average, $1.67 billion, according to data compiled by Bloomberg.

A rise in computer attacks is spurring sales of antivirus programs as more people stay online, with global spending on security software and hardware projected to climb 9.1 percent this year to $71.7 billion, according to Gartner Inc. Steady demand for Symantec’s products and services are helping the company buy time as it searches for a permanent chief executive officer and faces pressure to sell its data-storage business.

“They are still the biggest security vendor by far and there are some huge advantages associated with that,” said Patrick Walravens, an analyst at JMP Securities LLC who has the equivalent of a buy rating on the stock. With the ability to sell to existing customers, “they have the channel, now they need the product to put through it,” he said.

The shares of Mountain View, California-based Symantec rose 1 percent to $23.97 at the close in New York.

Fiscal first-quarter profit, excluding certain items, was 45 cents a share, Symantec said. Analysts were predicting a profit of 42 cents. The latest quarter was a week longer than the same period a year earlier.

Tough Environment

Sales of antivirus software to businesses grew, according to interim Chief Executive Officer Michael Brown, thanks to corporations upgrading their personal computers, a trend that also benefited Intel Corp.

Still, Symantec is evaluating the performance of all its business lines as it looks for areas to cut, Brown said in May. The company is seeking a permanent replacement for Steve Bennett, who was fired in March after less than two years on the job. Bennett had cut 1,000 jobs, or 5 percent of staff, and disrupted business by reshuffling the sales force.

For the current period, which ends in September, Symantec is forecasting profit of 40 cents to 44 cents a share on sales of $1.6 billion to $1.64 billion in the fiscal second quarter. Analysts were predicting profit of 45 cents on revenue of $1.63 billion for the fiscal second quarter.

Strategic Options

Symantec’s management is under pressure to break up the company as demand slows for conventional antivirus software, which can’t catch the most sophisticated attacks, and the PC industry’s years-long slump erodes one of its main sources of sales. While worldwide PC unit sales fell 1.7 percent in the latest quarter, the smallest quarterly drop in two years, IDC predicts that PC shipments will decline through 2018.

For the first quarter, net income rose 50 percent to $236 million, or 34 cents a share, from $157 million, or 22 cents, a year earlier.

Symantec has hired JPMorgan Chase & Co. to explore its strategic options and defend against activist shareholders, people with knowledge of the matter told Bloomberg News in April. Some possible strategies include a buyout by a private equity firm, a breakup and sales of the data-storage unit, or further job cuts to boost profit margins. Such measures could provide “meaningful upside” to the stock, Credit Suisse wrote in an Aug. 5 research note.

Segment Performance

Sales in consumer security rose 1.1 percent to $740 million, while corporate security revenue rose 2.7 percent to $345 million and data storage sales rose 1.4 percent to $650 million, Symantec said. Geographically, North America was “very strong,” Europe was “good” and India -- where Symantec has most of its employees -- had a “tremendous quarter,” Brown said in an interview.

To expand beyond antivirus software, the company is adding services such as data-breach investigations and threat intelligence. It is also cutting costs. The company could eliminate jobs in customer support as it looks for ways to streamline how help calls are handled, Brown said.

Brown, who previously said he wasn’t interested in the permanent CEO job, said his thinking has shifted based on the opportunities he sees for the company. The search committee is interviewing finalists and a decision will be announced next month, Brown said.

“If the board asked me to consider it, I’d really have to think about it carefully,” Brown said. “I see tremendous potential at Symantec.”

To contact the reporter on this story: Jordan Robertson in San Francisco at jrobertson40@bloomberg.net

To contact the editors responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net Reed Stevenson, Jillian Ward

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