Declining PC Demand Could Deal a Blow to Symantec’s Already Weak Consumer Division

SYMC: Symantec Corp logo
SYMC
Symantec Corp

PC Sales are expected to contract heavily in the fourth quarter of calendar 2015, which could deal a severe blow to the consumer segment of security software vendor Symantec (NYSE:SYMC). According to a recent IDC report, PC sales are expected to contract by 10% in the fourth quarter, resulting in a total decline of 10.3% in full year 2015. The fall is expected to extend into 2016, albeit at a slower pace. [1] Given the close correlation of sales of PC’s and antivirus software, the woes of Symantec’s beleaguered consumer division are likely to continue in the near term.

Our price estimate of $26 for Symantec is about 25% higher than its current market price.

See our complete analysis for Symantec here

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Tough Times Ahead For Consumer Security Software

Symantec’s consumer security software business has been struggling in the last few years. Its revenues have fallen from almost $3 billion in 2012 to a little over $2 billion in 2014. Its revenue share has also contracted sharply from over 40% in 2012 to just over 30% in 2014. The declining trend is expected to continue, due to not just the sluggish demand for PC’s, but also to Symantec’s heavy focus on the enterprise division going forward. (Read: With Veritas’ Operational Separation Complete, What’s Next for Symantec?)

Symantec Revenue

Given this background, the continued weakness in the PC market could drag down Symantec’s troubled consumer division even further. To be fair, the contraction in PC sales is expected to taper off in 2016. Compared to the 10% decline expected in full year 2015, PC shipments are expected to fall by 3% next year and stabilize by the end of 2016, before achieving modest growth thence forward.  In sum, a sustained lack of growth in PC sales can only add to the pressure on Symantec’s consumer security software division.

PC Sales

Most of Symantec’s ongoing strategies revolve around bolstering its enterprise security software business. Last year, a Symantec executive declared that “antivirus is dead”. [2] Nevertheless, the company has no plans to abandon its Norton Antivirus suite and plans to add features to cover new threats and technologies. According to our estimates, the Consumer Security Software division still accounts for 30% of Symantec’s valuation. Therefore, the company would be well served to take stock of the impending slump in demand and strategize accordingly to offset it.

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Notes:
  1. Worldwide PC Shipments Will Continue to Decline into 2016 as the Short-Term Outlook Softens, IDC, December 4, 2015 []
  2. Symantec Develops New Attack on Cyberhacking, Wall Street Journal, May 4, 2014 []