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What’s Symantec’s Expected Performance for Fiscal 4Q16?

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Shift in consumer preference toward subscription offerings has hampered Symantec’s license revenues

Previously in the series, we looked at Symantec’s (SYMC) recent announcements about its search for a new CEO (chief executive officer) and its reduction in its soon-to-be-announced fiscal 4Q16 guidance. With the Veritas sale completed in 2016, Symantec is now left with the Consumer Security and Enterprise Security segments.

Commenting on the company’s reduced guidance, Symantec shared that the shift in customer preferences in its Enterprise Security segment will result in lower licensed revenues in fiscal 4Q16 and more of the revenues being deferred to the future.

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Fall in DLP impacted Symantec’s Enterprise segment

Symantec stated that although its DLP (data loss prevention) offerings increased in the low teens, the revenue fell 5%. Endpoint protection and DLP are the fastest-growing subsegments of the company’s Enterprise Security Software business.

In fiscal 1Q16, Symantec launched DLP 14, which extends its on-premise DLP capabilities to cloud email and storage applications such as Box (BOX) and Microsoft (MSFT) Office 365. Previously in the series, we highlighted Symantec’s dominant position in the DLP space. Apart from Symantec, Intel’s McAfee (INTC) and EMC (EMC) are other prominent players in this space.
The Enterprise Security segment is expected to report $467 million in revenue in fiscal 4Q16, which is less than earlier provided guidance of $480 million–$500 million. In fiscal 2017, Symantec expects revenue growth to be either nearly flat or to experience a slight fall in its Enterprise Security segment.

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

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