UPDATE: Symantec 1Q Surges On Margin Growth; 2Q View Weak
July 28 2010 - 6:04PM
Dow Jones News
Symantec Corp.'s (SYMC) fiscal first-quarter profit surged on
higher margins, but the security- and storage-software company's
revenue was roughly flat from a year ago and missed
expectations.
Shares tumbled 8.3% to $13.45 in after-hours trading, as the
company also predicted second-quarter earnings of 27 cents to 28
cents a share on revenue of $1.45 billion to $1.47 billion.
Analysts polled by Thomson Reuters expected 34 cents and $1.53
billion, respectively.
Echoing the tentativeness of the economic recovery, the company
saw a "cautiousness" in the final weeks of the quarter as the
Symantec sales force tried to close corporate deals, said Chief
Financial Officer James Beer in an interview before the earnings
call.
"That impacted the revenue picture for the quarter, particularly
for larger customers who buy our storage products," Beer said. "The
procurement process took longer than normally expected. There is
still a reasonable amount of economic uncertainty in the
market."
But during a conference call to discuss earnings, Symantec
President and Chief Executive Enrique Salem added that "Those deals
have not been lost to competitors. We closed many of them in
July."
Storage products make up about 15% of Symantec's revenue.
Sales of security software have held up rather well during the
economic slowdown, as fending off viruses and hackers remains a top
information-technology concern. In May, the company unveiled a new
family of products targeted primarily at mobile phones,
highlighting the growing importance of non-PC devices connected to
the Internet.
For the quarter ended July 2, Symantec posted a profit of $161
million, or 20 cents a share, up from $74 million, or 9 cents a
share, a year earlier. One-time, non-recurring tax issues
contributed to the boost in profit, Beer said.
The three products the company sells in the
software-as-a-service model had double-digit percentage growth,
Beer added. The company plans to sell more of its
products--particularly its storage products--this way, he
added.
"We envisage more of our corporate backup and archiving products
offered over the Web as well," Beer said.
Excluding stock-based compensation and other items, earnings
grew to 35 cents from 33 cents. Revenue was essentially flat at
$1.43 billion.
In May, the company projected earnings of 35 cents to 36 cents a
share on revenue of $1.48 billion to $1.5 billion.
Gross margin climbed to 81.5% from 78.2%.
Sales in the storage and server management segment, the
company's largest business, decreased 5.2%, while the security and
compliance segment's sales were up 1.2%. Consumer-segment sales
jumped 5.8%.
In May, Symantec said it would purchase VeriSign Inc.'s (VRSN)
identity and authentication business for $1.28 billion. The
acquisition gives Symantec a unit that sells products that
businesses use to encrypt and protect information. The business had
revenue of $410 million last year, and Symantec expects the deal to
add to earnings starting in the September quarter of 2011.
At close of trading on Wednesday, shares in Symantec traded at
$14.67, down about 18% to this year. Still, that is better than the
23% drop in shares of Symantec's close competitor, McAfee Inc.
(MFE). McAfee, based in Santa Clara, Calif., will announce its
quarterly results Thursday.
(John Kell contributed to this report.)
-By Jeanette Borzo, Dow Jones Newswires; 415-765-8230;
jeanette.borzo@dowjones.com
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