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Why the Enterprise Security Business Is Looking Soft

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Aug. 18 2020, Updated 6:28 a.m. ET

Symantec’s Enterprise Security business

Symantec’s (SYMC) Enterprise Security business segment, which comprises ~50.0% of its total business, continued to witness declining sales in the last few quarters. Despite the launch of new products, the company’s Enterprise Security business seems to be struggling to retain its dominance in the endpoint security market.

From the graph above, we can see the Enterprise Security unit revenue trends in the last five quarters. During this period, the segment’s revenues declined at a CAGR (compound annual growth rate) of 4.1%. 

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In the last three quarters, we can see that the company’s Enterprise Security revenues saw a continuous decline. In the fiscal first quarter of 2019, the revenues from this segment witnessed its highest decline in the last five quarters. Its revenues fell 15.5% YoY (year-over-year) to $565.0 million, in the quarter.

Reason for reducing outlook

Symantec (SYMC) sealed some large multi-product corporate deals in the fiscal first quarter of 2019. However, the company witnessed a sharp fall in revenues in the reported quarter, driven by a 31.0% YoY decline in billings. 

The company believes that it failed to convert some major deals during the quarter, which is expected to impact its fiscal 2019 Enterprise Security business. Symantec expects its fiscal 2019 revenues to reach $2.27 billion–$2.35 billion compared with its previous guidance of $2.29 billion–$2.39 billion.

Other factors hurting sales

Symantec’s Integrated Cyber Defense platform is gradually gaining acceptance by a variety of entities. Symantec is already forming a partnership with leading cloud operators like Amazon’s (AMZN) AWS and Microsoft’s Azure to make its products available in the cloud.

FireEye’s (FEYE) intelligence-based cybersecurity products such as iSIGHT Intelligence and Endpoint 4.0 are also gaining market share. These products use analytics to improve threat management.

Most large firms are also integrating AI with security products to quickly detect threats and to provide remedies. Soft PC sales provide another headwind for the Symantec’s Enterprise Security business.

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