Symantec’s Q2’17 Earnings Preview: Gains From Blue Coat’s Acquisition To Offset Decline In Consumer Security

Symantec (NYSE:SYMC) is set to report its Q2’17 earnings on Thursday, November 3rd.  (Fiscal years end with March.) Symantec’s revenues have declined at  a CAGR of 3.6% since 2012, due to tepid growth in the consumer security market and rising competition from smaller players, such as NuData Security and SailPoint. To overcome this trend and to expand its footprint in the cloud security market, Symantec acquired Blue Coat Systems this year. The acquisition was completed August 1st and therefore Symantec anticipates a 14% – 20% increase in its enterprise security segment to be reflected with results. Symantec can also gain by cross-selling its current products to Blue Coat’s customers, especially in the form of information security over the cloud.

Recently, Symantec has  partnered with VMware for providing security to their endpoint management system and has launched the latest ‘Symantec Endpoint Protection 14’ which uses artificial intelligence and machine learning techniques to identify and eliminate threats. The effect of these two developments is more likely to be visible in Q3’17.

See our complete analysis for Symantec

Blue Coat To Add To Symantec’s Topline But Likely To Weigh On Bottomline In Q2’17

• Symantec is expecting only 50% of Blue Coat’s revenues as an addition to its topline in Q2’17, as most of Blue Coat’s revenues are skewed towards the month of October (Blue Coat’s Q2 ends in October).
• On the other hand, costs incurred by Blue Coat will still be two thirds of the quarter which is likely to shrink the bottomline. This is a temporary effect and will be rectified in the subsequent quarters.
• In the long run, Symantec is likely to benefit from Blue Coat’s 15,000 customers worldwide and its fast growing double digit topline growth.
• This deal has made Symantec the world’s largest enterprise security software company with massive opportunities in fast growing segment of cloud information security and data loss protection (DLP).

Dwindling PC Sales And Slow Innovation To Threat Consumer Security revenues

• The decline in PC sales has been a primary reason for Symantec’s falling consumer revenues. According to Gartner, PC sales fell 5.2% in the second quarter of 2016, which was the seventh consecutive quarter of decreases.
• Low PC sales lead to lesser demand for consumer security software such as Symantec’s Norton Antivirus. Gartner reported a 7% decrease in sectors Symantec addresses within the consumer security market in 2015.
• Symantec has been slow in shifting its reliance from PC and endpoint security to the unconventional consumer segments such as web, email and cyber security.
• Although Symantec is working on innovations in Wifi and IoT (Internet of Things) security to boost this segment, but any substantial product innovation is yet to be released by the company which has led to a low guidance by the management for its consumer business.

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