Disappointing steering for the corporate’s enterprise safety software program and providers enterprise can also be weighing, and it does a lot to boost contemporary questions in regards to the firm’s standing in a really aggressive IT safety market.
After the bell on Thursday, Symantec reported March quarter (fiscal fourth quarter) income of $1.23 billion and non-GAAP EPS of $zero.46, beating consensus estimates of $1.19 billion and $zero.39. The firm’s Enterprise Security income rose 1% yearly to $620 million after adjusting for forex swings and the Oct. 2017 sale of Symantec’s web site safety certificates enterprise. Its Consumer Digital Safety income rose 6% to $614 million after adjusting for foreign exchange and the Feb. 2017 acquisition of ID theft-protection agency LifeLock.
But Symantec additionally guided for June quarter income of $1.135 billion to $1.165 billion and EPS of $zero.31 to $zero.35, beneath a consensus of $1.18 billion and $zero.41. And it guided for fiscal 2019 (ends in March 2019) income of $four.76 billion to $four.9 billion and EPS of $1.50 to $1.65, beneath a consensus of $four.93 billion and $1.80.
Of course, the outlook is being overshadowed proper now by Symantec’s disclosure that its board’s audit committee “has commenced an internal investigation in connection with concerns raised by a former employee.”
The firm provides the audit committee “has retained independent counsel and other advisors” to help its investigation, that its outcomes and steering “may be subject to change based on the outcome of the Audit Committee investigation” and that it is unlikely that the probe shall be completed in time for Symantec to file its fiscal 2018 annual report “in a timely manner.”
Symantec’s inventory plunged greater than $9 to beneath $20 following the information. Shares are actually at their lowest ranges since mid-2016, and are additionally again at ranges first reached in 2004. At least eight sell-side analysis corporations have issued downgrades.
While it is simple to place the entire blame for this on a whistleblower probe whose penalties might very nicely be critical, to take action could be to let Symantec off the hook for gross sales steering that appears fairly disappointing. Particularly when one seems to be on the specifics.
On its earnings name, which notably featured no question-and-answer session, Symantec mentioned its steering implied flat June quarter and monetary 2019 income progress on an natural foundation. It additionally forecast that Enterprise Security income could be down by 2% on an natural foundation in fiscal 2019, and an unspecified share within the June quarter. This shall be offset by modest natural for the Consumer Digital Safety section, which final quarter offset a small subscriber decline by rising its common income per consumer (ARPU).
In a vacuum, the Enterprise Security steering would already look weak. But it seems to be worse when one remembers that company IT spending has been pretty strong this 12 months, with fairly just a few big-name enterprise tech corporations posting stable earnings stories. And it seems to be worse nonetheless when one remembers that safety spending continues growing faster than IT spending basically, as enterprise afraid of being the subsequent sufferer of a significant knowledge breach make log out on large investments in community, endpoint and cloud safety merchandise.
For some time, there was optimism amongst buyers that Symantec might maintain its personal on this surroundings, even when its natural Enterprise Security progress wasn’t precisely stellar. The firm’s $four.65 billion 2016 buy of peer Blue Coat (a significant participant within the safe internet gateway /software program market) was well-received, and a salesforce restructuring carried out final 12 months gave the impression to be paying dividends.
But it is secure to say that a lot of this optimism is gone following Symantec’s newest steering, which suggests the corporate will lose significant enterprise share between now and March 2019. BTIG’s Joel Fishbein, who downgraded Symantec to Neutral final evening, says the outlook makes his agency marvel “what, beyond accounting changes, is going on in the [Enterprise Security] business.”
From the skin wanting in, it appears as if a scarcity of focus could possibly be hurting Symantec. The firm’s security product line is gigantic, overlaying all the things from gateways to e-mail encryption to malware evaluation to forensics to danger analytics. This places Symantec in competitors with many safety pure-plays which were rising quickly (assume Palo Alto Networks (PANW) or Proofpoint (PFPT) ), in addition to IT giants who’ve made rising safety gross sales a significant precedence (assume IBM (IBM) or Cisco Systems (CSCO) ).
Possibly making the state of affairs worse: There has been a deluge of funding for safety tech startups lately — startups who’ve been utilizing that capital to aggressively rent salespeople and compete for enterprise offers. This 12 months has already seen two notable safety tech IPOs — Zscaler (ZS) and Carbon Black (CBLK) — and extra are seemingly on the best way.
There aren’t any straightforward fixes that Symantec can apply to place its Enterprise Security enterprise on higher footing in such a aggressive surroundings. And the truth that administration has to cope with an audit committee probe whereas it seems to be for solutions is certain to make issues even tougher.