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How Was Symantec’s Financial Position in Fiscal 3Q16?

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May. 16 2016, Updated 6:23 a.m. ET

Increasing competition in the cybersecurity space is adding to Symantec’s woes

Previously in the series, we discussed Symantec’s (SYMC) fiscal 3Q16 results. With a market cap close to ~13 billion, Symantec is a leading player in the cybersecurity space. However, the company is currently finding it challenging to report revenue growth, as it is transitioning its operations more towards enterprise security and reducing its dependence on the consumer security business. The consumer security business is heavily impacted by continued softness in the PC space.

Symantec’s transition has exposed the company to various challenges, an important one being the emergence of new cybersecurity players like Palo Alto Networks (PANW), Fortinet (FTNT), and FireEye (FEYE).

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Symantec’s cash, debt, and cash flow position

Symantec completed the Veritas sale and followed its policy of returning value to its shareholders through dividends. Symantec announced that the company will return $5 billion through share repurchases and dividends to shareholders by March 2017.

In 3Q16, Symantec reported that it has $2.3 billion in cash, cash equivalents, and short-term investments. As of January 1, 2016, Symantec carried $1.7 billion in total debt on its books. All of Symantec’s debt is long term.

In fiscal 3Q16, Symantec’s non-GAAP (generally accepted accounting principles) net income and EPS (earnings per share) were $171 million and $0.26, respectively. Its operating cash flow stood at $112 million. Since Symantec is a subscription offerings business, it enjoys a negative cash conversion cycle. That means it can manage its working capital judiciously.

4Q16 expectations

For fiscal 4Q16, Symantec expects revenue and EPS in the range of $885 million to $915 million and $0.24 to $0.27 per share, respectively. Analysts expect Symantec to report revenue and EPS of $901.9 million and $0.25 per share, respectively.

Investors who wish to gain exposure to Symantec can consider investing in the PowerShares QQQ (QQQ). QQQ has an exposure of ~27% to application software. It invests ~0.3% of its holdings in Symantec.

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