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Symantec Well Poised On Growth Initiatives; Time To Hold?

Published 05/17/2016, 09:08 PM
Updated 07/09/2023, 06:31 AM

On May 17, 2016, we issued an updated research report on Symantec Corporation (NASDAQ:SYMC) .

Symantec provides a broad range of content security and information backup solutions to individuals and enterprises. Moreover, the company’s mobile and cloud security products are gradually gaining market acceptance. The storage and server management business provides recovery solutions and heterogeneous storage-end server platforms. We believe these innovative products and solutions will help Symantec win customers, thereby increasing its business volume.

Months of hard work and negotiations paid off in early 2016 when Symantec finally completed the sale of its information management division – Veritas to the Carlyle Group (NASDAQ:CG) . Selling Veritas to the Carlyle Group reflects the company’s strategy of refocusing on the security market while lessening its dependence on antivirus. We believe that the divestment is likely to streamline Symantec’s operations and maximize shareholders’ value. Renewed focus on the core business can also revive the company’s operational performance.

Symantec has made a big play in the endpoint security market. Lately, cyber security has been a growing threat for organizations of all sizes. The growing security threats and potential hacking attacks led the company to unveil a new method for advanced threat protection (ATP), thereby delivering more complete attack prevention solutions. Symantec Managed Security Services - Advanced Threat Protection will help organizations to assess the level of vulnerabilities, detect threats and mitigate intellectual property theft.

Moreover, Symantec has been returning cash through share repurchases and dividend payments. During fiscal 2015, Symantec spent $413 million on dividends and $500 million on share repurchases. Continuing with the strategy, Symantec returned a total of $4.9 billion through share repurchases and dividend payments in fiscal 2016. These activities not only boost investor confidence but also provide support to earnings per share.

It is worth mentioning that the Internet security market is an attractive area even during recessionary times because of increasing online traffic. According to research firm, Research and Markets, the global IT security spending market is expected to grow at a CAGR of 9.29% (2012-2016). Moreover, tech research firm Gartner predicts that by 2018 more than half of the enterprises will use security service companies that emphasize on data protection, security risk management and security infrastructure management to help manage their security network infrastructure. The increase in security spending is therefore likely to be beneficial for this leading vendor of solutions into the market.

However, Symantec delivered weaker-than-expected results during the fourth quarter of fiscal 2016. The year-over-year comparisons were unfavorable for both the top and bottom line as well. Revenues declined mainly due to a shift in consumer buying preferences and unfavorable foreign currency exchange rates. Furthermore, the company issued a tepid outlook for first-quarter and fiscal 2017. Additionally, continued investments in product development and launch could impact margins in the near term.

Going further, smaller companies, like Kaspersky, are consistently launching comparable products. These, along with competition from the likes of Intel (NASDAQ:INTC) and Microsoft (NASDAQ:MSFT) , remain headwinds. The uncertainty over PC sales adds to its woes.

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



SYMANTEC CORP (SYMC): Free Stock Analysis Report

MICROSOFT CORP (MSFT): Free Stock Analysis Report

INTEL CORP (INTC): Free Stock Analysis Report

CARLYLE GROUP (CG): Free Stock Analysis Report

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