Shares of Symantec Corporation (NASDAQ:SYMC) soared significantly over the last 10 days. The main reason behind this could be its recent agreement to acquire Blue Coat, Inc., a leading web security solution provider, from private equity firm Bain Capital. (Read: Symantec to Boost Cybersecurity Suite with Blue Coat Buyout)
The Blue Coat buyout is expected to enhance Symantec’s capabilities significantly. As per Symantec, the acquisition will not only provide economies of scale and bolster its existing portfolio, but will also provide the necessary resources for the development of solutions to “protect large customers and individual consumers against insider threats and sophisticated cybercriminals”.
The deal will also give Symantec direct access to Blue Coat’s huge customer base, thereby boosting the combined company’s revenues. The company revealed that the combined entity’s revenues would have been $4.4 billion in fiscal 2016 as against $3.6 billion it reported as a standalone company.
Since the announcement of the Blue Coat acquisition on Jun 12, the stock has jumped over 20%. Moreover, shares of the company are now trading 28.7% higher than its last 52-week low of $16.14 attained on Mar 4.
Of late, Symantec’s earnings and revenues have both been under pressure due to persistent weakness in PC sales, which is hurting the core Norton Anti-virus software business. Apart from this, intensifying competition from Palo-Alto Networks (NYSE:PANW) , FireEye Inc. (NASDAQ:FEYE) and Check Point Software (NASDAQ:CHKP) has been eroding its market share in the enterprise segment.
As a result, the company has had to resort to aggressive restructuring measures. Keeping with this, on Jan 29, Symantec closed the sale of its Veritas business for $7.4 billion to Carlyle Group (NASDAQ:CG). We believe that the deal provided Symantec with much needed funds for expanding its product portfolio as well as its presence in fast growing markets.
With the acquisition of Blue Coat, the company will be able to reduce its dependence on the PC market and strengthen its position in the enterprise security space. Revenues from the enterprise security segment are now expected to contribute 62% to the company’s top line.
We expect the latest acquisition to contribute significantly to the company’s overall growth.
Currently, Symantec carries a Zacks Rank #3 (Hold).
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