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Software Companies 3Q17 Review: IBM, Oracle, Symantec, Microsoft

PART:
1 2 3 4 5 6 7 8 9 10
Part 6
Software Companies 3Q17 Review: IBM, Oracle, Symantec, Microsoft PART 6 OF 10

The Impact of Symantec’s Cost-Cutting Program

Symantec achieved cost milestones

For fiscal 2Q18 (September quarter), Symantec (SYMC) reported an operating margin and adjusted net profit that rose significantly from the year-ago quarter. Its operating margin was 34.1% in 2Q18, a 29.2% rise from the previous year, implying that its operating margin rose 4.9% YoY (year-over-year). Its adjusted net profit was $268 million in 2Q18, indicating an improvement of 40% YoY.

The margin and bottom line improvements that Symantec registered in 2Q18 were most likely the fruits of the company’s cost-reduction program. In 2Q18, Symantec reported achieving $550 million in cost synergies tied to the acquisition of security services vendor Blue Coat. Symantec also achieved $30 million in cost synergies tied to its acquisition of LifeLock, an identity theft protection service.

The cost milestones tied to Blue Coat and LifeLock were achieved ahead of schedule, implying strong execution by Symantec on the cost-cutting front.

The Impact of Symantec’s Cost-Cutting Program

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Sale of website security business could save more costs

Symantec recently announced that it has completed the sale of its Website Security and PKI Solutions to DigiCert. The company sold the assets for $960 million in cash and stock considerations. Selling its Website Security business could lead to more cost-cutting opportunities for Symantec.

The company plans to use the proceeds from the sale of its Website Security business to repay debt. Symantec was carrying a long-term debt of ~$6.1 billion at the end of fiscal 2Q18. Proofpoint (PFPT) and FireEye (FEYE) were carrying long-term debts of $831.2 million and $770 million, respectively, at the end of their September quarters. But Fortinet (FTNT) and Check Point Software Technologies (CHKP), two other security vendors, didn’t carry any debt at the end of their September quarters.

Reducing its interest expense burden

Debt repayment could help Symantec reduce its interest expense burden, potentially leading to more profits.

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