Due to slowing PC shipments, the Europe slowdown and a weak storage business, Symantec (NASDAQ:SYMC) reported Q1 2013 revenues of $1.66 billion, growing only 1% y-o-y. The security and compliance division grew 7% y-o-y with revenue of $501 million. Services and storage & server management business declined 2% with revenue of $584 million and $62 million, respectively.
Geographically, U.S. sales grew 2% y-o-y to $809 million while international growth was flat at $859 million. Asia Pacific and Japan sales grew 9% y-o-y to $323 million and Europe, Middle East and Africa saw a decline of 8% y-o-y to $436 million. Cash flows from operations declined significantly to $340 million, down from $503 million last year. Symantec repurchased 19 million shares for $301 million and has $683 million shares remaining in the current board authorized stock repurchase plan. ((Quarterly Earnings Materials, investor.symantec.com, July 25, 2012))
Changing The Security And Compliance Business Model
Symantec has been facing declining license sales, but increased subscriptions as customers prefer to pay for security software as a subscription. License sales declined 10% y-o-y to $193 million. Symantec is changing its focus to security Software as a Service (SaaS) model with some limited success as content, subscription and maintenance services grew 3% y-o-y to $1.47 billion. For users, it is cheaper to pay for security on an ongoing basis while Symantec benefits from reduced costs, resource pooling and lower revenue losses from piracy. Security software sales follow the business cycle of PC sales, which is facing competition from tablets.
Mobile Security Is The Next Big Thing
The bring-your-own-device (BYOD) revolution at the work place has driven up demand for mobile and tablet security. Symantec’s software provides a mobile anti-virus that also helps prevent theft of data from lost or stolen mobile phones. This is a big growth opportunity as smartphones are expected to grow at 55% or so and reach a yearly shipment size of one billion phones by 2015. 
We currently have a $24 Trefis Price Estimate for Symantec, which is about 50% above the current market price.Notes: