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What Impacted Symantec’s Operating Segments in Fiscal 2016?

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Symantec’s Enterprise segment

Previously in this series, we discussed Symantec’s (SYMC) fiscal 2016 results. Let’s have a look at how its operating segments performed in fiscal 2016.

In fiscal 2016, Symantec’s Enterprise Security and Consumer Security segments posted revenues of ~$1.9 billion and ~$1.7 billion, respectively. They fell by 7% and 13% on a year-over-year basis and in constant currency terms, this was a decline of 2% and 9%, respectively.

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Although DLP (data loss prevention) revenue fell by 5%, as the company noted in its fiscal 4Q16 guidance, it actually grew by 13% for fiscal 2016. Symantec stated that its DLP offerings saw their revenues fall in fiscal 4Q16 primarily due to new businesses shifting toward DLP subscription versions. The company added that this was also due to “lower than expected close rates of large DLP deals.”

Endpoint Protection and DLP are the fastest-growing subsegments of the company’s Enterprise Security Software business. So, the fall in DLP impacted Symantec’s Enterprise Security segment, which fell by 4% in constant currency terms in fiscal 4Q16. Moreover, a shift in consumer preferences toward subscription offerings hampered Symantec’s License segment’s revenues and consequently, its Enterprise Security revenues.

In fiscal 2017, Symantec aims to release additional DLP cloud add-ons for Box (BOX), OneDrive, and Salesforce.com (CRM). DLP cloud is already available for Microsoft (MSFT) Office 365 and Google’s (GOOG) (GOOGL) Gmail.

Continued sluggishness in PC space impacted Symantec’s Consumer Security segment

Symantec’s Consumer Security segment has been impacted by continued softness in the PC market, which is primarily focused on PC security solutions. Softness in the PC space is expected to continue in 2016, which has aggravated the company’s situation. PC shipments fell by 9.6% to 64.8 million units in 1Q16.

Since 2007, 1Q16 marked the first time that PC shipments fell below 65 million units. That means this latest fall in PC shipments reached the lowest level in almost a decade. Symantec expects the segment’s revenue to fall 3%–6% in fiscal 2017.

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

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