Symantec Profit, Sales Outlook Miss Estimates Ahead of SplitJordan Robertson
Symantec Corp. issued profit and revenue forecasts short of analysts’ predictions, as the security software maker seeks to develop more modern anti-hacking technologies and split off its data-storage division this year.
Fiscal first-quarter profit, excluding some items, will be 41 cents to 44 cents a share on sales of $1.5 billion to $1.54 billion, Symantec said in a statement Thursday. Analysts projected profit of 45 cents and revenue of $1.62 billion for the period through June, according to data compiled by Bloomberg.
While security providers have benefited from demand for technologies to foil attacks, Symantec has lagged behind its peers. Even though Gartner Inc. sees corporate spending on security climbing 8.4 percent this year to $78 billion, analysts predict a decline in Symantec’s revenue. By splitting up the Mountain View, California-based company, Chief Executive Officer Michael Brown is aiming to give each business more “flexibility and focus” to pursue growth.
“Guidance could have been better,” said Pat Walravens, an analyst at JMP Securities, who has the equivalent of a buy rating on the stock. “The consumer business is dropping off more quickly than expected.”
Symantec shares fell 1.8 percent to $25.43 at 9:43 a.m. Friday in New York. The stock through Thursday had climbed 12 percent since Bloomberg News reported Oct. 7 that the Mountain View, California-based company was splitting into two.
Fiscal fourth-quarter profit, excluding certain items, was 43 cents a share, versus an estimate of 44 cents. Revenue in the period ended April 3 fell 6.6 percent to $1.52 billion, trailing the average estimate for $1.56 billion.
The Norton-brand consumer business was hardest hit, with revenue slipping 19 percent to $408 million, tracking a decline in personal-computer sales as consumers increasingly use smartphones and tablets to get online.
Sales of security tools to businesses and the government shrank 3.9 percent to $491 million, while data-storage revenue rose 1.5 percent to $619 million.
Revenue was hurt by currency fluctuations, the CEO said in an interview. Changes to the Norton business, such as canceling some bundling deals with PC makers and moving from auto-renewals to subscriptions, also reduced revenue while improving profitability, Brown said.
“This is a bit of setback,” said Daniel Ives, an analyst at FBR Capital Markets & Co. who has the equivalent of a hold rating on Symantec. “Investors were not expecting spectacular numbers to begin with.’
Symantec has been challenged by the rise of rivals such as FireEye Inc. and Palo Alto Networks Inc., whose technologies are designed to detect more stealthy attacks. As part of its breakup, Symantec is expanding into more lucrative areas including data-breach investigations, where FireEye’s Mandiant division dominates. Hiring has picked up, with Symantec’s cybersecurity services division increasing by about a third to 500 people within the last year.
Net income in the fourth quarter was $299 million, compared with $333 million a year earlier.
While Symantec has approached EMC Corp., NetApp Inc. and other potential suitors to gauge their interest in buying its Veritas data-storage business, splitting off the business is proving to be a challenge. Hurdles include the potential cost of buying the division -- somewhere from $6 billion to $10 billion -- and the complexity of detangling the business from the rest of Symantec, people with knowledge of the matter have said.
Brown said he’s satisfied with the company’s progress on preparing for the spinoff of Veritas, such as separating the sales forces. He declined to comment on attempts to sell the business.
‘‘We’re focused on the spin because that’s what’s in our control, and of course as a public company, if we get interest in a business we’ll take a look at that,” Brown said.
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