Operating performance and margins
Previously in this series, we discussed Symantec’s (SYMC) financial performance, its operating segment’s contribution to the overall revenue, and the sale of its Information Management business, Veritas, in fiscal 1Q16.
All of Symantec’s operating segments posted a double-digit fall in fiscal 1Q16. Despite a fall in its revenue, Symantec managed to expand its non-GAAP (generally accepted accounting principles) operating margin by 240 basis points to reach 27.40% in fiscal 1Q16. In 1Q16, Symantec’s non-GAAP net income and EPS (earnings per share) were $275 million and $0.40, respectively.
Symantec has hinted that with the sale of Veritas, it expects a revenue growth rise in fiscal 2Q16 due to its improved product pipeline. However, it’s yet to be seen whether or not the rapid upgrades and innovation in its offerings find preference among its customers.
As we’ll discuss later in this series, the cybersecurity space is expected to witness exponential growth thanks to the SMAC (social, mobile, analytics, and cloud) revolution. As a result, many technology leaders like Hewlett-Packard (HPQ) and Cisco Systems (CSCO) are seeking growth opportunities in the cybersecurity space.
Cash, debt, and cash flow position
In fiscal 1Q16, Symantec reported that it has $3.88 billion in cash, cash equivalents, and short-term investments. As of July 3, 2015, Symantec carried $2.08 billion total debt on its books. The majority of its debt continues to be long term.
Its OCF (operating cash flow) and FCF (free cash flow) stood at $300 million and $222 million, respectively. Being a subscription offerings business, Symantec enjoys a negative cash conversion cycle. That means that it can manage its working capital judiciously.
You can consider investing in the Technology Select Sector SPDR Fund (XLK) and the PowerShares QQQ Trust ETF (QQQ) to gain exposure to Symantec. XLK and QQQ invest about 0.41% and 0.32% of their holdings in Symantec, respectively.