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Investment Overview for Symantec (NASDAQ:SYMC)
Below are key drivers of Symantec's value that present opportunities for upside or downside to the current Trefis price estimate for Symantec:
- Symantec's Share in Consumer Security Software: Symantec's Consumer Security segment includes various products focused on making it simple for customers to be productive and protected at home and at work. The segment includes consumer security suites such as solutions from its flagship Norton brand, endpoint security and management solutions, encryption, and mobile offerings. Norton solutions account for a majority of revenues for this division. We currently forecast Symantec's Share for Consumer Security products to increase from around 28% in 2015 to around 34% by the end of the Trefis forecast period. However, if Symantec's share in the consumer security software market declines to 20% by the end of our review period, there could be a 20% downside in our valuation for the company.
- Symantec's Share in Enterprise Security Software: Symantec's Enterprise Security segment includes product offerings that can securely conduct business. The segment includes enterprise security products such as Secure Socket Layer (SSL) Certificates, authentication, mail and web security, data center security, data loss prevention, and information security service offerings. We currently forecast Symantec's Share in Enterprise Security products to increase marginally, from around 11% in 2015 to a little over 12% by the end of the Trefis forecast period. Much of the market share gain is expected to result from security and business continuity offerings for deployments in data centers. Our valuation will increase by 10% if Symantec manages to expand its market share aggressively to 20% by the end of our review period.
- Global Enterprise Security Software Market: We currently forecast the global enterprise security software market to increase from $17 billion in 2015 to around $29 billion by the end of the Trefis forecast period. The global enterprise security software market expanded at an annualized pace of approximately 5% between 2012-2015. The impact of a faster growth or decline in the global enterprise security software market on our valuation of the company is expected to be less than 10%.
Symantec makes money by selling two types of software:
- Norton AntiVirus software for consumers
- 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.
Symantec bought the SSL and Authentication business from Verisign in a transaction deal worth $1.28 billion in May 2010. This SSL business has been included in the company's enterprise security product division.
From a valuation perspective, Symantec's consumer security offerings continue to remain the most valuable segment for the company, accounting for 80% of Symantec's value.
High Share in Consumer AntiVirus Solutions Market
With a market share of 40%, Symantec is the leader in consumer antiVirus solutions. Although its share has declined somewhat since reaching 56% in 2005, the company still commands a very high market share that is driving the company's overall valuation. One of the major reasons for significant competition in the consumer security software market is the high margin nature of the business. Symantec's margins for the consumer security software market stood at 60% in 2015.
Blue Coat acquisition
In June 2016, Symantec announced that it will acquire web and cloud computing security software specialist, Blue Coat Systems for $4.65 billion. The transaction is as much a bet on cloud computing as it is on Blue Coat's CEO Greg Clark, who will take over the CEO role at Symantec.
The acquisition was accompanied by a cash infusion of $1.25 million in Symantec by existing strategic private equity investors, in the form of convertible debt. This represents a strong vote of confidence in the company following the acquisition. Indeed, Blue Coat's strong presence in the web and cloud computing security software market is likely to push Symantec to the top of the league in this sector following the purchase.
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.
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.
How 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 Methodology
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