Has Symantec Turned a Corner?

Sarah Lacy

Finally, Symantec had some undeniably good news when it reported earnings on July 26. Ok the profit numbers looked bad thanks to some merger related expenses. But revenue for the quarter was $1.26 billion, up from $699.9 million last year, better than analysts expected. Even the bears were grasping at arguments as the stock shot up more than 10% over two days to close the week at $17.42.

A few analysts upgraded the stock, with Friedman, Billings, Ramsey & Co. declaring it a “watershed quarter.” Symantec’s CFO James Beer said much the same thing when I talked to him the next morning. Ever since Symantec’s troubles started some 18 months ago, executives have maintained acquiring Veritas was the right move and that neither Microsoft nor McAfee’s deals with internet service providers would cannibalize its lucrative consumer business. Finally, here was a quarter that backed both of those arguments up.

But is it really the start of another big Symantec push towards steady revenue growth or just one good quarter? I buy the enterprise story more than the consumer one. It seemed weird at first, but Symantec plus Veritas does make conceptual sense. The technology is different, but to the customer, securing data and backing it up are two sides of the same coin. It solves a real world problem: We need our data to function as a company, just make that possible no matter what. Ok, when the deal was announced two Decembers ago Wall Street was worried about integration. Guess what? They were right. The company says the sales teams and marketing message are just now starting to gel, after an ugly year of up and down and unpredictable quarters.

But consumer? I think it’s too early to brush off concerns Microsoft and McAfee pose. The Norton brand name is dominant, yes. It is the gold standard. But dominance can be eroded by just-as-good technology that’s free. Were I a Symantec investor, I’d be watching those market share numbers closely over the next year. You can bet CEO John Thompson is. While Symantec is a secure market leader, there’s no reason for them to slash their own prices, but he’s far too competitive to stand pat if McAfee and Microsoft start making real gains.

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