Is Symantec in Trouble? - Analyst Blog

Security software provider, Symantec SYMC is reportedly in troubled waters since activist investors and private equity firms are rallying for a sale or split of the business.

Per Reuters, various private equity firms along with some activist investors have already contacted Symantec for a possible deal. However, no confirmations or conclusions could be derived from the reported meetings.

Earlier, in April, Bloomberg reported that Symantec was in the process of hiring JPMorgan Chase JPM to look for an alternative to and defend against activist shareholders.

However, Symantec has been in difficult times of late. Its latest chief executive officer Steve Bennett, who took over Symantec's reigns in mid-2012, initiated several organizational changes to improve sales and profitability.

But while the realignment of the organization's structure by eliminating several mid-level management positions bolstered the bottom line, sales force reorganizations are yet to yield the desired results. On the other hand, Symantec's sales were impacted by the disruption in customer relationships.

This ultimately led to the ouster of the CEO, which again didn't go down well with many of the stakeholders in the company.

Moreover, the weak PC market has led to the company's dismal top-line performance. Per the latest IDC report, PC shipments will drop 6.1% in 2014, the third consecutive year of decline. This will affect the sale of Symantec's PC security solutions and business volume to a considerable extent.

To counter this decline, Symantec has shifted its focus to the mobile business, which will enable it to generate additional volumes.

Moreover, Symantec is making efforts to attract small and mid-sized businesses with the introduction of enhanced versions of storage management and Internet security solutions. These solutions are primarily targeted at information-driven businesses.

The company faces increased competition from other bellwethers such as Microsoft MSFT and Intel INTC. Moreover, continuous investments in new products and services in the absence of meaningful top-line growth could impact the company's margins.

This could be the reason that the security company reported negative returns both on a year-to-date basis (down 11.5%) and from a 1-year perspective (down 14.0%) despite the rising share market and improving economic environment.

Currently, Symantec has a Zacks Rank #3 (Hold).