Symantec Third-Quarter Sales Forecast Misses EstimatesDenni Hu and Jordan Robertson
Symantec Corp. forecast sales and profit that fell short of analysts’ estimates as customers adopted newer technologies for repelling hackers and the company plans to split into security and data-storage businesses.
Fiscal third-quarter profit, excluding certain items, will be 47 cents to 50 cents a share on revenue of $1.65 billion to $1.69 billion, the company said in a statement yesterday. That compared with analysts’ average estimate for 50 cents on sales of $1.7 billion, according to data compiled by Bloomberg.
The Mountain View, California-based company is the latest Silicon Valley company to seek a split. Hewlett-Packard Co. and EBay Inc. have also announced similar plans. Chief Executive Officer Michael Brown, who was promoted to the permanent role in September, described the separation as a way to simplify the sales process and allocate more resources to areas of growth for the company, such as security services and threat intelligence.
“The spinoff trumps operating results -- it will create value for shareholders,” said Joe Cornell, an analyst at Spin-Off Advisors in Chicago. “People are hopeful it will generate better results down the road.”
The shares of Symantec fell in extended trading. The stock advanced less than 1 percent to $25.18 at yesterday’s close in New York, leaving it up 6.8 percent this year.
Net income in the second fiscal quarter, which ended Oct. 3, was $244 million, or 35 cents a share, compared with $241 million, or 34 cents. Revenue fell 1.2 percent to $1.62 billion.
The company said forecasts for the current period reflect anticipated changes in foreign exchange rates. Excluding the currency impact, Symantec is on track to reach its original targets for the full fiscal year for sales of $6.63 billion to $6.77 billion, the company said.
“Foreign currency is a big part of why the earnings was hurt so much,” said Robert Breza, an analyst at Sterne Agee & Leach Inc., who has the equivalent of a hold rating on the company’s stock.
Best-known among consumers for its Norton antivirus software, which ships with new personal computers and is the top-selling brand, Symantec is now facing challenges from the shift to smartphones and tablets, which are attacked less frequently than PCs. In the corporate market, technologies from firms such as FireEye Inc. and Palo Alto Networks Inc. are gaining market share and are seen as better able to stop advanced attacks.
The biggest and fastest-growing parts of the security market aren’t in areas where Symantec has been strong, such as endpoint protection and related segments. Services such as consulting, outsourcing and network security appliances will attract $72 billion in spending by consumers and corporations this year, up 8 percent from 2013, according to Gartner Inc.
“The separation of storage gives each business a more focused platform, that will allow us to accelerate growth, align our business to focus on execution, therefore create more value for our shareholders,” Brown said in an interview.
Sales in each of Symantec’s business units -- consumer security, corporate security and data storage -- declined in the latest fiscal year that ended in March, according to a document filed Oct. 22 with the U.S. Securities and Exchange Commission that reconciled Symantec’s results with new organizational divisions the company announced in July.
While the company is facing challenges, its status as the world’s biggest maker of security software and one of the biggest providers of data storage software give it a large global footprint that has helped mitigate some of the fallout.
The company announced Oct. 10 that it will break up into two publicly traded companies by the end of 2015. The split will unwind Symantec’s acquisition of data-storage maker Veritas Software Corp. for $10.2 billion in 2005. Brown said the decision was based on an extensive business review and a conclusion that Symantec needed to be nimbler and more focused.
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