Symantec Sales Forecast Shows Improving Security Demand
Symantec Corp. (SYMC) is benefiting as hacking attacks fuel higher demand for cyber-security software, while cost cuts are bolstering profits.
The biggest maker of antivirus tools issued a revenue forecast that topped projections. Sales in the fiscal first quarter will be $1.65 billion to $1.69 billion, the company said in a statement yesterday. Analysts, on average, are predicting revenue of $1.64 billion for the period that ends in June, according to data compiled by Bloomberg.
Spending on security software and equipment is on track to increase 9.1 percent this year to $71.7 billion, according to Gartner Inc. The forecast buys the struggling company time as it deals with a management transition and a market that is shifting to smartphones and tablet computing, where security tools aren’t as widely used. Two chief executive officers have left in as many years, and the company has hired bankers to explore strategic options and defend against activist investors.
“They still have a real story to tell around security,” said Patrick Walravens, an analyst at JMP Securities in San Francisco who has the equivalent of a buy rating on Symantec shares. “They’re still the No. 1 player in the space -- that gives them a lot of advantages.”
Symantec rose 3.3 percent to $20.79 at the close in New York. The stock is down 12 percent this year, while the Standard & Poor’s 500 Index is up 1.6 percent.
For the fourth quarter, which ended March 28, net income rose to $217 million, or 31 cents a share, from $190 million, or 27 cents, a year earlier. The result for the recent period included a $22 million charge related to the restatement of income from some contracts over the past three years.
Revenue fell 7 percent to $1.63 billion. Sales declined in each of Symantec’s key business units -- consumer security, business security and data storage -- yet profit rose because of lower costs, helped by job cuts. Sales and marketing expenses were 16 percent lower than last year at $584 million.
“Overall you’d call it a C+ type earnings, but that’s what investors were expecting,” said Daniel Ives, an analyst at FBR Capital Markets & Co. in New York who has the equivalent of a hold rating on the stock. “They cut their way to show better performance on the bottom line. You can’t cut your way to growth; that continues to be the issue.”
Profit, excluding items, will be 41 cents to 43 cents a share in the current quarter, Symantec said, compared with the analysts’ average estimate for 43 cents.
Symantec is under pressure to break up the company as demand slows for antivirus software, which is now widely seen as incapable of catching all but the easiest-to-find attacks. Symantec is hiring JPMorgan Chase & Co. to explore its strategic options and defend against activist shareholders, people with knowledge of the matter said last month.
The company is evaluating the performance of all its business lines as it looks for areas to cut, Michael Brown, Symantec’s interim CEO, said in an interview. Any job cuts would be isolated to specific products and wouldn’t be companywide, he said.
“We feel like there’s a lot more to do at the company,” he said. “We’re already well-positioned -- with deep technology breadth and scale -- and we’re in markets that are growing. We’ve tried to do too much. We’ve tried to invest in too many things.”
Symantec fired CEO Steve Bennett in March after less than two years on the job. His ouster came amid a sales slowdown and after the departure of top executives including Chief Financial Officer James Beer and Francis deSouza, president of products and services.
Bennett, who previously was CEO of TurboTax software maker Intuit Inc., had cut 1,000 jobs, or 5 percent of staff. He engineered a restructuring of Symantec’s sales force that was meant to help restart growth and instead disrupted customer relationships. Bennett had replaced Enrique Salem, who was ousted in July 2012. Both executives resisted pressure to sell Symantec’s data-storage business, which Symantec entered with its $10.2 billion acquisition of Veritas Software Corp. in 2005.
Symantec said it bought back $125 million worth of its shares in the latest quarter and has $658 million remaining for stock repurchases.
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