Symantec Stumbles On Q4 Sales, CEO Calls It Quits

Symantec Corporation SYMC shares were falling Friday after the cybersecurity company reported mixed fourth-quarter earnings, lower-than-expected guidance and the surprise departure of its top executive. 

The Report

Earnings per share fell in line with expectations, but sales of $1.195 billion declined year-over-year and missed a $1.21-billion consensus estimate. 

Total billings fell 16 percent, non-GAAP operating margins missed estimates, cyber safety billings declined and Symantec lost small and medium business opportunities. Most notably, the firm’s enterprise security segment failed to clear a low bar.

“The BlueCoat business had a more precipitous-than-expected decline in hardware and license sales as a result of a more pronounced shift to the cloud,” Mizuho Securities analyst Gregg Moskowitz said in a Friday note.

“ ... We believe that competitive dynamics are contributing to this weakness.”

The quarter’s bright spots were consumer security — which saw retention rates rise — and multi-product consumer sales, which posted higher revenue. 

The CEO Switch

Greg Clark announced his immediate resignation as Symantec's president, CEO and board member as he deals with a family situation. Director Richard Hill will serve as interim CEO and president.

The turnover may be a blessing for Symantec, according to Mizuho. 

“At any rate, we do believe that whomever is ultimately chosen to be CEO will likely be more focused on margin improvement — particularly within Enterprise Security — as compared with prior management,” Moskowitz said. 

The Rating

Mizuho Securities maintained a Neutral rating on the stock and cut its price target from $25 to $22.

“Valuation remains interesting, and we believe activism could drive upside in the shares,” Moskowitz said. “However, patience is likely required, and we reiterate our belief that SYMC faces secular growth challenges in its two most important enterprise security product areas: endpoint and secure web gateways.”

Symantec shares were down 13.4 percent at $19.20 at the time of publication Friday. 

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