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Symantec’s Enterprise Security Operating Segment Could Drive Growth

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Fiscal 2Q16 continues growth in Enterprise Security business

So far in this series, we have discussed Symantec’s (SYMC) performance in fiscal 2Q16 and the factors that contributed to the decline in its Consumer Security segment. Let’s discuss how its Enterprise Security segment performed in fiscal 2Q16. In 2Q16, this segment reported revenues of $485 million, a 5% decline on a year-over-year (or YoY) basis. However, 2Q16 marked the second consecutive quarter of growth in this segment.

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Growth in Symantec’s Enterprise Security segment was partly due to a 10% YoY revenue increase from the Information Protection Solutions segment, which was driven by increased customer traction for Data Loss Prevention (or DLP 14). In fiscal 1Q16, Symantec launched DLP 14, which extends its on-premise DLP capabilities to cloud email and storage applications such as Box and Microsoft (MSFT) Office 365.

DLP products’ double-digit growth in 2Q16 boost Enterprise Security business

Endpoint protection and DLP are the fastest-growing subsegments of the company’s Enterprise Security Software business. They continued their growth in fiscal 2Q16.

Symantec Data Loss Prevention products recorded another strong quarter in 1Q16, and its revenues grew by 37% on a year-over-year basis in constant currency terms. Endpoint protection, also called threat protection, is a significant subsegment of Symantec’s security software revenues and grew 2% on a YoY basis. However, continued weakness in endpoint management, mail, and data center security offset this growth.

According to the 451 Group, Symantec leads the DLP market with a 47% market share, as the above chart shows. It is followed by Intel’s McAfee (INTC), with an 18% market share, and EMC (EMC), with a 4% share. Technology behemoths Microsoft (MSFT) and IBM (IBM) are trying to enter this rapidly growing market.

Previously in this series, we noted that Symantec has highlighted its Enterprise Security business among its top four priorities. Industry analysts are also of the same opinion. Daniel Ives, an analyst with FBR Capital Markets & Co., noted, “I think the biggest opportunity is on enterprise security, that is where the core growth and biggest opportunity is.”

You can consider investing in the iShares US Technology ETF (IYW) to gain exposure to Symantec. IYW invests ~0.45% of its holdings in Symantec.

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