Symantec’s strategy to drive growth
In the prior part of this series, we discussed Symantec’s (SYMC) performance in fiscal 2Q16. The company’s focus toward the completion of the Veritas sale, as well as a transition toward a subscription-based model, impacted its revenue growth in fiscal 2Q16.
In its fiscal 2Q16 earnings release, Symantec highlighted the priorities that focus on new product development and enhanced integration, which will form the next stage of its transformation after the Veritas sale.
Unified Security strategy
Symantec’s Unified Security strategy is a single platform-based approach to combine threat intelligence information from its Symantec and Norton endpoints with analytics. It also utilizes additional security solutions such as data loss prevention (or DLP) and Advanced Threat Protection (or ATP) and cybersecurity services.
Symantec expects the first installment of this strategy, a module for gathering data from endpoints, to be due in December 2015. Under this strategy, another 11 products are expected to be launched in the next 1.5 years. With its expected pipeline of products, Symantec’s CEO, Michael Brown, wants to command the overall security intelligence space.
Building an Enterprise Security pipeline
Symantec stated that it has a pipeline of new products in the Enterprise Security segment that addresses Threat Protection, Information Protection, and Cybersecurity Services. The cybersecurity space is expected to witness exponential growth as part of the SMAC (social, mobile, analytics, and cloud) revolution. As a result, technology leaders such as Hewlett-Packard (HPQ) and Cisco Systems (CSCO) are seeking growth opportunities in the cybersecurity space.
According to Brown, more than 80% of security growth comes from Symantec’s partners, in which the Enterprise Security business plays a major role. To enhance engagement with its partners, the company is focusing on executing its Unified Security strategy. In the final part of the series, we will discuss the Enterprise Security segment’s performance in 2Q16.
Cost control and efficient capital allocation
Symantec’s management stated its plan of achieving a long-term operating margin of 30%. However, going by the company’s current state—along with the Veritas sale that is scheduled to finish on January 1, 2016—Symantec has to bear standard expenses like real estate and legal fees that are bound to pressure its margins. So, management’s expectations of achieving a 30% operating margin look a bit challenging to achieve in the near term.
Commenting on the acquisitions from the cash realized from the Veritas transaction, Brown stated, “M&A is a key part of the strategy.” In fiscal 2Q16, Symantec announced the approval of the $500 million accelerated share repurchase program.
You can consider investing in the PowerShares QQQ Trust ETF (QQQ) and the iShares US Technology ETF (IYW) to gain exposure to Symantec. QQQ and IYW invest about 0.32% and 0.45%, respectively, of their holdings in Symantec.