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Investment Overview for Symantec (NASDAQ:SYMC)
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Below are key drivers of Symantec's value that present opportunities for upside or downside to the current Trefis price estimate for Symantec:
Storage Software
- Symantec's share in the Storage Software market: We currently forecast Symantec's market share to increase from around 16.8% in 2012 to 17.5% by the end of Trefis forecast period. Symantec's edge in this market lies in its data de-duplication technology, in which it was the pioneer. However, EMC rebounded strongly through its acquisition of Data Domain. There could be a downside of more than 10% to the Trefis price estimate if EMC and IBM are able snatch market share from Symantec causing Symantec's market share to decline to 15% by the end of Trefis forecast period.
- Global Storage software market: We currently forecast the global storage software market to increase from around $14.5 billion in 2012 to around $20 billion by the end of Trefis forecast period. The market growth rate was strong during the economic boom periods of 2006 and 2007, when this market showed a growth of around 10%. There could be an upside of 15% to the Trefis price estimate if the overall market grows at 10% to reach $24 billion by the end of Trefis forecast period.
Norton Antivirus Software
- Symantec's share in Consumer Antivirus software market: We currently forecast Symantec's market share to decline from around 46% in 2012 to around 43% by the end of Trefis forecast period. Norton antivirus software is known to be resource intensive and this continues to frustrate consumers. Additionally, free antivirus software like AVG and Microsoft Security Essentials provide adequate protection and Symantec is losing market share to them. If it loses market share and reaches 25% by the end of Trefis forecast period, there could be a downside of more than 10% to the Trefis price estimate.
- Global Consumer Antivirus software market: We currently forecast the global consumer antivirus software market to increase from around $4.5 billion in 2012 to around $6.4 billion by the end of the Trefis forecast period. The market growth rate was strong during the economic boom periods of 2007 and 2008, when it showed a growth of around 10%. There could be an upside of 10% to the Trefis price estimate if the overall market grows at 10% to reach $7.5 billion by the end of our forecast period.
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Symantec makes money by selling three types of software:
- Norton AntiVirus Software for consumers
- Storage software for businesses
- Security software for businesses
Symantec provides security software to both consumers and businesses that help them block malicious software ("malware") such as viruses, spyware, Trojan Horses, worms, bots and rootkits. The company's software blocks more than 245 million malicious attacks throughout the world every month, many of which are new threats. Symantec's software is also used to block spam emails and provide protection from phishing programs.
In addition, the company also provides storage software to businesses to simplify, standardize and manage their data center operations. This segment came from Symantec's acquisition of Veritas in July 2005 at a valuation of $13.5 billion.
Symantec also bought the SSL and Authentication business from Verisign in a transaction deal worth $1.28 billion in May 2010.
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The Storage Software segment is Symantec's most valuable segment for the following reason:
Large Market
Storage Software is a large market of around $14 billion. The major players in this market are EMC, Symantec, IBM, NetApp, HP and CA. EMC is the leader in this market with a share of around 24%, with Symantec at around 18%.
We believe the factors behind the Storage software market growth are:
- Exponential growth of data. Data requirements have risen at an exponential rate in the last few years. Data de-duplication technology in storage software helps to cut storage hardware requirements and save tremendous costs for companies.
- Dependency on critical business systems. Advancement in technologies have brought an increase in the number of automated systems. These systems are business critical systems and are required to be always "on". For example, an ATM machine of a bank cannot fail at any point in time, and high availability software assures the same.
Norton Antivirus Software is the second most valuable segment for Symantec for the following reason:
High Share in Consumer Internet Security Market
Symantec is the leader in the Consumer Internet Security Market with a market share of 46%, though its share has declined somewhat since reaching 56% in 2005. We believe that Symantec's share in the $6.3 billion Consumer Internet Security Market will be around 43% by the end of Trefis forecast period.
We believe Symantec may lose market share in the Consumer Internet Security Market due to
- High pricing of its products relative to smaller players
- Its reputation of being computer resource intensive, which continues to frustrate users
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Increasing threat from complex malwares and phishing programs
Today's generation of malware and phishing programs have become more sophisticated, targeting Internet users and Internet Security companies such as Symantec. At the same time, the number of malware attacks have gone up.
For example, the Conficker and Clampi malware is the latest complex threat to attack the Internet users. It attacks websites of banks and financial institutions and extracts confidential information such as passwords, credit card details etc.
Browser based operating systems could reduce demand for separate security software
Symantec faces threats from browser based Operating Systems like Google's Chrome. Symantec provides software that detects malware and prevents users from downloading viruses or losing vital information. Chrome will essentially eliminate downloaded software by keeping all software running in the confines of a browser window and over the Internet. Thus, Chrome will reduce the need for people to download potentially harmful software from the internet.
Trefis Forecast Rationale for Global Consumer Antivirus & Security Software Market
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${forecast} represents the Global market for Antivirus and Internet Security Software. The antivirus software identifies and blocks files affected with viruses, spyware, Trojan Horses, worms, bots and rootkits, or in simple terms malware, when run on a PC. The internet security software also provides protection against phishing attacks and email spam detection, in addition to what Antivirus software does.
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${forecast} has increased from $3.4 billion in 2008 to around $4.6 billion in 2012.
Trefis forecasts that ${forecast} will continue to increase at a moderate rate.
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Trefis considered the following factors for its forecast:
- Malware attacks and email spam has gone up at an exponential rate
- Symantec, on an average, blocks in excess of 245 million malicious attacks throughout the world every month, most of them comprise online threats that have never been seen earlier.
- Reduction in Personal Computer pricing doesn't mean reduction in Internet Security Software pricing
- Internet Security Software Pricing has seen an increase as it constantly adds new features to combat the ever increasing number of threats from complex malware. For example, companies have introduced the feature to make virus and spam detection more accurate by having the behavior or reputation based check rather than the signature based check.
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Increasing PC units sales and increased antivirus software penetration to also help the market grow
- PC units including notebooks have been growing at a healthy growth rate over the past few years.
- Antivirus penetration has also increased over the years as most OEMs or PC manufacturers have reached ties-up with antivrius software providers to provide software for PCs. For example, Symantec's Norton products have tied up with PC manufacturers like HP, Acer and Lenovo to provide its software.
- Smartphone security market is bound to play a bigger role
- Smartphones growth has increased at a fast rate over the past few years and is expected to continue in the future. With it, smartphone security will also play a crucial role as more and more people browse Internet and check e-mails through their smartphones.
- According to a study by UK-based telecoms analyst Juniper Research, by 2011, the Smartphone Internet Security market could be worth $2 billion.
Back to Company OverviewHow Does Trefis Modelling Work?
How do we get the historical numbers for this chart?
Trefis has a team of in-house Analysts who gather historical data from company filings and other verifiable sources. When historicals are available, we explain how we got them at the bottom of the Trefis analysis section below.
Who came up with the Trefis forecast for future years?
The Trefis team of in-house Analysts considers a variety of factors when projecting any forecast. The rationale for our projections is explained in the Trefis analysis section below.
How does my dragging the trendline on the chart impact the stock price?
- We use forecasts for business drivers to calculate forecasted Revenues and Profits for each division of the company.
- We then use forecasted Profits in a Discounted Cash Flow (DCF) model to obtain the Price Estimate for the company.
See more on:
DCF MethodologyView All Help Topics