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Symantec Profit Beats Estimates on Increased Corporate Security Spending

Symantec Profit Beats Estimates on Increased Corporate Security Spending

By Jordan Robertson, Jing Cao, Bloomberg | Updated: 6 November 2015 11:18 IST

Symantec Corporation reported second-quarter profit that exceeded analysts' projections as the world's biggest cyber-security software maker benefited from increased corporate spending to protect against hacking.

Earnings, excluding some items, were 44 cents a share for the fiscal second quarter, the Mountain View, California-based company said in a statement Thursday. Analysts had estimated 42 cents a share on average for the period, which ended October 2, according to data compiled by Bloomberg. Sales fell 7 percent to $1.5 billion (roughly Rs. 9,868 crores).

Symantec - a pioneer in software that had been essential to blocking the viruses and computer worms that plagued the early Internet - is making progress in adapting to new realities in security technology. Part of that strategy includes buying other security providers, and the company has already made two acquisitions this year, Chief Executive Officer Mike Brown said on a conference call. Gartner predicts the total market will exceed $83 billion (roughly Rs. 5,46,031 crores) next year.

"We're not in a hurry - there's a lot of opportunity out there," Brown said. "We're going to be very selective about choosing the right targets that fit with the strategy, that we can grow dramatically and that have the appropriate risk- adjusted return for shareholders."

Symantec rose 1.1 percent to $21.12 at 10:53am in New York. The stock was down 19 percent this year through Wednesday.

Hackers once mounted indiscriminate attacks on computers by sending broad e-mails. Today, the most worrisome assaults are precisely tailored to specific individuals or businesses, easily defeating one-size-fits-all defenses. The attackers' growing sophistication has helped incubate a fast-growing industry in which companies such as Palo Alto Networks Inc. and Tanium Inc. that offer new approaches and technologies have enjoyed thriving sales and valuations.

Cyber-security threats are "clearly on the rise," Brown said, adding that he hasn't seen companies slow down their spending in the area. FireEye Inc. CEO Dave De Walt said late Wednesday that the advanced-threat protection provider has been affected by slowing growth in emergency spending, which would be used to react immediately to incidents.

The pending sale of Symantec's Veritas data-storage division to Carlyle Group for $8 billion (roughly Rs. 52,629 crores) was driven by years of shareholder pressure to narrow the company's focus to security and invest in new technologies to keep up with rivals. The company on Thursday said the Veritas sale is on track to occur by January 1. Symantec said it has received board authorization to accelerate the return of $2 billion (roughly Rs. 13,158 crores) to shareholders, starting with a $500 million (roughly Rs. 3,290 crores) accelerated share repurchase.

The Veritas sale will give Symantec much-needed cash for acquisitions and research and development into advanced security technologies. A succession of chief executive officers at Symantec had contended with how to allocate resources effectively for security as well as data storage as the original thesis behind their combination didn't play out as planned.

Former CEO John Thompson pushed for the $13.5 billion (roughly Rs. 88,830 crores) Veritas purchase in 2005, with the idea that consumers and businesses would buy data-storage products alongside their security software. The businesses never got fully in sync as corporate buying patterns don't necessarily track in tandem.

Symantec forecast revenue for the third quarter at $890 million to $920 million (roughly Rs. 5,856 crores to Rs. 6,053 crores) and for the fourth quarter at $885 million to $915 million (roughly Rs. 5,822 crores to Rs. 6,020 crores). The guidance was lowered because enterprise security sales won't be enough to compensate for a first-quarter shortfall, Chief Financial Officer Thomas Seifert said on the call.

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