NortonLifeLock (NASDAQ:NLOK) NLOK recently announced its agreement to acquire Avira from Investcorp Technology Partners in an all-cash deal worth approximately $360 million. The acquisition is likely to close in the fourth quarter of fiscal year 2021.
The company expects to benefit from Avira’s portfolio of cybersecurity and privacy solutions which will drive expansion of its Norton 360 platform and aid its go-to-market model.
New Acquisition Deal Fuels Customer Base Expansion
Avira hosts more than 30 million active devices and has over 1.5 million paying customers. Therefore, its inclusion will boost NortonLifeLock’s customer base and is expected to serve as a key growth driver in the long term. Moreover, Avira’s freemium business model is a major positive to attract new customers.
Additionally, the deal bodes well for the company’s focus on enhancing Cyber Safety solutions amid rising digital activities. Moreover, with a strong data protection portfolio, the company will be able to ensure cyber safety of its existing as well as prospective customers.
Markedly, NortonLifeLock added 117,000 customers in the second quarter of fiscal 2021 and 608,000 customers over the last 12 months. At the end of fiscal second quarter, the company had direct customer count of 20.7 million and total customer base of over 50 million.
Further, the acquisition of Avira is expected to drive revenue growth by 3 points and result in an operating margin of nearly 50% after accounting for deal synergies. Additionally, the company intends to strengthen its international footprint by gaining exposure in Europe and key emerging markets.
Strong demand for Cybersecurity Products Drives Growth
Meanwhile, NortonLifeLock’s shares have rallied 34.5% year to date compared with the Zacks Security and Safety Services industry’s growth of 17.7%.
This outperformance is largely driven by solid adoption of the company’s cybersecurity and information backup solutions due to surge in hacking events and data breaches, globally.
Per the IDC’s report, worldwide security spending is expected to reach $125.2 billion in 2020, reflecting 6% growth year over year. Further, it is likely to grow at a compound annual growth rate of 8.1% from 2020-2024, to reach $174.7 billion in 2024. NortonLifeLock stands to benefit from an increase in security spending by enterprises.
Additionally, the company launched new solutions such as Norton 360 for Gamers, which promotes cybersecurity in the gaming space and Norton 360 with LifeLock for family, an all-in-one protection plan to help protect the whole family’s identities, devices and online privacy. It also expanded its privacy offering by introducing Privacy Monitor Assistant, which helps customers reclaim control over their personal information.
The new capabilities are expected to drive innovation in the company’s product portfolio as well as bolster user acquisition and engagement on the its platform, thereby aiding the company’s top line.
Zacks Rank & Stocks to Consider
NortonLifeLock currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are CDW (NASDAQ:CDW) Corp. CDW, Microsoft MSFT and Arrow Electronics (NYSE:ARW) ARW. All three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term earnings growth rate for CDW, Microsoft and Arrow Electronics is pegged at 13.1%, 12.5% and 9.8%, respectively.
(We are reissuing this article to correct a mistake. The original article, issued on December 8, 2020, should no longer be relied upon.)
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