Symantec (NASDAQ:SYMC) is one of the leading players in storage software, anti-virus software, online authentication software and online verification certificates. We currently have a $26 Trefis price estimate for Symantec, which is almost 40% higher than its current market price. The upside to our estimates come from the expected growth in storage software driven by cloud computing and the growth in security software driven by the Windows 8 release. We also expect to see sales increase in Norton’s mobile phone and tablet security applications.
Norton has already released new versions of its anti-virus software in anticipation of the Windows 8 launch next month. The new Norton Anti-Virus, Norton Internet Security and Norton 360 have all been updated and optimized to work with the Windows 8 touch interface and come with “five layers of patented protection”. We explain our rationale below for the current price estimate of Symantec.
Storage Software Market Growth Opportunity
Symantec’s most popular brand is the Norton anti-virus line of security software, but the biggest division in terms of value is the storage software division, accounting for ~41% of the Trefis price estimate of Symantec. The storage software market grew to $3.5 billion for the first quarter of 2012. Symantec is the third biggest player in the storage software space, owning 15% of the market, after market leaders EMC and IBM. Data protection, recovery and archiving software were the two fastest growing sub-markets generating $1.25 billion and $411 million in revenues and growing at ~5%. Symantec has an added advantage of a line of security software focused on enterprise solutions. We expect the growing storage software market driven by cloud computing, big data analytics and virtualization to help drive Symantec’s stock. 
Mobile Security To Drive Security Business
Symantec has been losing market share to free anti-viruses like Microsoft Security Essentials, AVG and Avast, but continues to remain among the top anti-virus players, with a 15% market share in North America and ~11% market share worldwide. We expect the latest Norton anti-virus line, which is optimized for Windows 8 and tablets to give it a bump in sales when the OS is launched next month.((Anti-Virus Market Share Report, www.opswat.com, June 2012)) The latest version has been tweaked to provide security against social network based malware and to prevent data theft from tablets and smartphones.
The bring-your-own-device (BYOD) revolution has driven strong demand for security in mobile devices and tablets, and Symantec has a range of software including mobile anti-virus that helps prevent theft of data from lost or stolen mobile phones. This is an added feature over the standard security measures to prevent viruses and malware, and is also 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. 
In the latest release, social network security spots scams and fake links, which are rampant on social networks, and the new Scam Insight tool provides warnings against potentially risky links and sites. The Norton Safe Web for Facebook app has been improved and users can scan their timelines for potential scams and malicious links.
Big Data Approach To Protection
Norton has been building a ‘reputational’ database which consists of the type of files hosted by websites, the reputation of the website and other criteria. This has lead to a massive database which Norton is beginning to leverage. This system can be used not only for anti-virus, but also for mobile smart-phone applications such as anti-theft software and prevention of phishing. When users run an anti-virus scan, millions of audit reports go into the Norton Insight database, which is then analyzed for patterns. A file that appeared for the first time, a few days ago on just 10 systems is much more likely to be a malicious software than a year-old file that’s found on a large number of systems. The former is classified as a “polymorphic virus”, and Norton focuses on monitoring the suspected file. This Big Data approach to security has led to an anti-virus that scans links shared over instant messengers (IMs). A significant percentage of links shared over IMs are malware, and this database will flag down links sent to a user that leads to a less reputable website.
Norton AntiVirus Software is the second most valuable division for Symantec and constitutes ~35% of our current Trefis price estimate for the stock.
We currently have a $26 Trefis Price Estimate for Symantec which is 40% above its current market price.Notes: