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Why Symantec Slashed Earnings Guidance for Fiscal 4Q16

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Symantec cuts fiscal 4Q16 guidance

Previously in the series, we saw that Symantec’s (SYMC) current CEO (chief executive officer) Michael Brown is stepping down and the company is searching for a new CEO. Symantec also announced in its fiscal 4Q16 guidance call that it’s slashing its fiscal 4Q16 earnings guidance. Symantec is scheduled to announce its fiscal 4Q16 results on May 22, 2016.

In its fiscal 3Q16 earnings release, Symantec stated that it expected revenue and EPS (earnings per share) to be $885 million–$915 million and $0.24–$0.27, respectively, in fiscal 4Q16. Symantec now has reduced its revenue guidance to $873 million, which is a 6% decline from the company’s earlier mid-point expectations. Symantec now expects EPS of $0.22, which is a double-digit decline of 24% from the prior guidance. Thomson Reuters analysts expected the company to report revenues and EPS of $893.1 million and $0.24, respectively.

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Falling licensing sales forced Symantec to reduce fiscal 4Q16 guidance

Diminishing demand for Symantec’s traditionally licensed offerings forced the company to slash its guidance. Also, customers increasingly prefer subscription offerings such as cybersecurity services and the company’s new ATP (advanced threat protection) solutions. Last year, Symantec’s management stated that the ATP market is growing at the rate of 40% per year.

Symantec’s 2017 product roadmap is focused on security offerings. Symantec’s product roadmap for fiscal 2017 includes new or improved offerings in advanced endpoint protection, cloud security, and security analytics. The SMAC (social, mobile, analytics, and cloud) revolution has forced organizations to consider cloud security as a top priority. According to 451 Research, for a majority of tech players, cloud security is now a prominent feature, whether it’s Amazon Web Services (AMZN), Oracle (ORCL), VMware (VMW), or Microsoft (MSFT).

Investors who wish to gain exposure to Symantec can consider investing in the Technology Select Sector SPDR ETF (XLK). XLK has an exposure of 35% to application software. It invests ~0.34% of its holdings in Symantec.

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