Symantec (SYMC) has reportedly chosen interim CEO Michael A. Brown to take up the responsibility of its full-time CEO after a six-month search.
In March this year, Symantec removed Steve Bennett as its president and chief executive officer. Bennett was appointed the CEO in mid-2012 and initiated several organizational changes to counter lower sales and profitability.
However, while the realignment of the organization’s structure by eliminating several mid-level management positions bolstered the bottom line, sales force reorganizations have not yielded the desired results yet. On the other hand, Symantec’s sales were impacted by the disruptions in customer relationships.
Nonetheless, since Brown took over the reigns as the interim CEO, not only have Symantec’s shares increased approximately 24% to date, but the company has also delivered better-than-expected first-quarter results in August.
Symantec’s reported revenues of $1.74 billion beat the Zacks Consensus Estimate of $1.66 billion and increased 1.5% year over year. Although the increase was not substantial, it was a welcome relief from the sales declines reported in the earlier quarters.
Not only that, Symantec reiterated the fiscal 2015 guidance. The company expects revenues in the range of $6.63 to $6.77 billion (mid-point $6.7 billion). The Zacks Consensus Estimate is pegged at $6.71 billion. Moreover, management expects an increase in margins owing to its operational efficiency.
As such, the Internet security market is an attractive area even at the worst of times because of the increasing web traffic. Hardware and software functionality including segments like firewalls, VPNs, intrusion prevention and detection and multi-purpose security known as unified threat management, are therefore expected to contribute to Symantec’s growth.
Symantec also has a broad range of content security and information backup solutions for 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, and an able leadership will help Symantec expand its business.
However, the weak PC market is affecting the sales of Symantec’s security solutions. As per the latest report by IDC, PC shipments will drop 3.7% in 2014, the third consecutive year of decline. This will affect sales of Symantec’s PC security solutions to a considerable extent as well as its business volume. To counter this decline, the company is concentrating more on the mobile business, which enabled it to generate additional volumes.
However, smaller companies, like Kaspersky, are consistently launching comparable products. These, along with competition from Intel (INTC) and Microsoft (MSFT), remain the headwinds.
Currently, Symantec has a Zacks Rank #3 (Hold).
A better-ranked stock at this time would be Micron (MU), which sports a Zacks Rank #1 (Strong Buy).
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