On Mar 6, 2014, we issued an updated research report on Symantec Corp (SYMC) after the company’s better-than-expected performance in the third quarter.
The company’s sales realignment strategy bore results as operating expenses declined primarily due to benefits from the restructuring initiatives, lower-than-expected spending on sales and marketing and tepid hiring pace. This, in turn, helped the bottom line to improve year over year despite a year-over-year decline in revenues.
The weak PC market is affecting the sales of Symantec’s security solutions. As per the latest report from IDC, PC shipments will drop 6.1% in 2014, the third consecutive year of decline. This will affect the sale of Symantec’s PC security solutions to a considerable extent and business volume. To counter this decline, the company is concentrating more on the mobile business, which enabled it to generate additional volumes.
Symantec is making efforts to attract small and mid-sized businesses (SMBs) by introducing enhanced versions of storage management and Internet security solutions. These solutions are expected to secure and manage the information-driven businesses.
Moreover, Internet security market is an attractive area even in recessionary conditions because of the increasing online traffic. Hardware and software functionality including segments like firewalls, VPNs, intrusion prevention and detection and multi-purpose security known as unified threat management, are expected to contribute to Symantec’s growth. Additionally, Symantec is trying to attract SMBs by introducing enhanced versions of storage management and Internet security solutions.
Nonetheless, the restructuring initiatives undertaken by Symantec will be impeded by execution risks. If the company’s revamped go-to-market strategy does not yield the desired results it will have a negative effect on its overall performance. Moreover, the company faces increased competition from other bellwethers such as Microsoft (MSFT) and Intel (INTC).
Currently, Symantec has a Zacks Rank #3 (Hold). Investors can consider a better-ranked stock like Juniper Networks (JNPR) which sports a Zacks Rank #1 (Strong Buy).
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