Symantec Corporation (SYMC): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

Summary:
Symantec delivered mixed second-quarter 2014 results, with earnings per share surpassing the Zacks Consensus Estimate but revenues lagging the same. Revenue declines across all its segments were witnessed due to lower-than-expected demand. Nonetheless, improvement in authentication and MSS businesses and increase in the NetBackup appliances are the positives for the company. However, the uncertainty over PC sales is going to affect its User Productivity & Production throughout the year. Reduction in tech spending, stiff competition from McAfee, Intel Corp and Microsoft as well as the prevailing economic turmoil in Europe may dampen Symantec's business prospects. Thus, we reiterate our Neutral recommendation on Symantec.

Overview:

Symantec Corporation, a world leader in Internet security technology, provides a broad range of content security solutions and information back up solutions to individuals and enterprises. Based in California, Symantec has operations in more than 50 countries. Symantec offers a wide range of application and software products for firewall, virtual private network (VPN), virus protection, vulnerability management, intrusion detection and security services.

Beginning in the first quarter of 2014, Symantec realigned its business segments into three divisions namely, User Productivity & Protection, Information Security and Information Management. The following products and services are included in the aforementioned business units:

User Productivity & Protection: This segment comprises Symantec's Endpoint Security and Management, encryption and mobile businesses.

Information Security: This segment includes Symantec's authentication, mail and web security, hosted security services, data center security, managed security services (MSS) and data loss prevention (DLP) offerings.

Information Management: Symantec's information management segment comprises backup and recovery-related services and products. Other offerings include archiving and e-discovery under information intelligence. This segment also offers information availability services (previously known as storage management).

Symantec recognizes its revenues under two main segments. Content, Subscription and Maintenance Revenues (87.0% of fiscal 2013 revenues) includes revenues from software maintenance and technical support for its products, content and subscription services primarily derived from security products, coordination of managed security services and Software-as-a-Service (SaaS) offerings. The segment also includes fees earned from professional services, such as consultancy and educational services. Fiscal 2013 revenues from this segment came in at $6.02 billion, up 3.4% on a year-over-year basis.

License revenues (13.0% of fiscal 2013 revenues) are generated from the licensing of several products and technologies. The revenues are recognized upon product delivery. Fiscal 2013 revenues from this segment came in at $885.0 million, down 2.4% from the year-ago period.

The company conducts its business across three geographic regions namely: Americas, which includes the United States, Canada and Latin America (54.0% of 2013 revenues) Europe, the Middle East and Africa (EMEA) (27.0% of 2013 revenues) and Asia-Pacific Japan (APJ) (19.0% of 2013 revenues).

The company operates in a highly competitive market, which is dynamic and witnesses rapid technological changes. It faces direct competition from big security software manufacturing companies. Apart from this, Symantec faces indirect or potential competition from retail, application providers, operating system providers, network equipment manufacturers and other original equipment manufacturers (OEMs), who may provide various solutions and functions in their current and future products.

Symantec is getting out of end point security and moving toward cloud and mobile. This is partly due to the secular decline in the PC market and the increase in the usage of handheld mobile devices.

The companies that offer direct or indirect competition to Symantec are McAfee, Inc., Microsoft Corporation, Trend Micro Inc., EMC Corporation, Hewlett-Packard Company, IBM Corp., Sun Microsystems, Inc. and VMware, Inc.

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