Symantec announced a turnaround strategy in 2013 under former CEO Bennett, and said it was focused on implementing the changes over the first two quarters of fiscal 2014. Although revenue rose in the first quarter of 2014, subsequent quarters saw a decline. The company expects a revival in revenue and earnings growth in early fiscal 2015, and said it was committed to its target of more than 5% organic growth and higher than 30% adjusted operating margin by fiscal 2017.
Symantec’s fiscal third quarter 2014 results, which were announced in January 2014, beat street expectations, but revenue fell 5% to $1.7 billion year-over-year due to its sales restructuring initiatives under the turnaround plan. License revenue declined 27% year-over-year while content, maintenance and subscription revenue was flat. GAAP operating margin of 23.8% grew 680 basis points, resulting in GAAP earnings per share of $0.40, up 29% year-over-year. Operating margins expanded due to lower sales and marketing expenses driven by sales restructuring initiatives. GAAP net income was $283 million, up 31% year-over-year. Symantec’s sales have been impacted by low demand for its storage and security products and a slump in the PC market.
In terms of segment highlights for the fiscal third quarter 2014:
The company also saw revenue decline domestically and internationally, especially in the Asia Pacific/Japan region, which represented 17% of total revenue and decreased 12% year-over-year. Symantec said the revenue declined primarily due to foreign currency translation adjustments resulting from the weakening of the Japanese yen against the U.S. dollar. International revenue represented 53% of total revenue and decreased 4% year-over-year.
The company’s outlook for the fourth quarter of fiscal 2014 came below analyst consensus. Symantec expects revenue of $1.615 billion to $1.655 billion, compared to $1.748 billion in the year-ago period. GAAP diluted earnings per share is forecast between $0.29 and $0.31 as compared to $0.27 in the year-ago period. GAAP operating margin was estimated at 18.0% to 19.5% compared to 14.6% in the year-ago period.
Bennett also did not rule out acquisitions. He said on the earnings call that, “we plan to announce several small acquisitions over the next couple of quarters that will help us accelerate the progress of our strategy. We are focused on acquiring technology and engineering teams that accelerate our progress in delivering innovative new solutions that win in the marketplace.”
The cybersecurity has seen plenty of M&A since last year as Cisco (CSCO) acquired Maryland security company Sourcefire for $2.7 billion, IBM acquired Trusteer while Intel Security (formerly McAfee) acquired Stonesoft. Tech security upstart FireEye acquired Mandiant for $1 billion in early January. Mandiant is a forensics firm that identified a sophisticated Chinese hacking operation. Palo Alto Networks acquired Morta Security and Israel-based Cyvera. UK-based Sophos recently acquired Cyberoam Technologies, an India-based provider of network security products.
Bennett said on fiscal third quarter 2014 earnings call that Symantec is forging partnerships with next-generation firewall makers to more tightly integrate the appliances with Symantec Endpoint Protection. For mobile security for both businesses and consumers, Symantec launched the latest version of Mobile App Center, formerly Nukona, for mobile device and mobile application management. The Symantec Sealed program delivers enterprise-class security for both internal and third-party applications on both iOS and Android operating systems. The program currently has 60 partners including Webalo, Damaka, Alfresco and SAVO Group, and more than 125 applications, Symantec said in a February release. Norton Zone, enables mobile customers to secure and access their corporate data anytime, anywhere on any device. These new services support Symantec’s existing Enterprise Mobility Management capabilities.
The company is also looking to enhance its capabilities under cloud infrastructure platforms, hardware supply chain, global security intelligence network and Information Fabric. With Information Fabric enterprises can effectively protect, manage and derive value from their data regardless of where it is stored, and at the same time have control and visibility over the data across private, public and hybrid clouds.
© 2013 Market Realist, Inc.