Symantec Q3 Earnings Preview: Product Upgrades And Blue Coat Synergies To Drive Growth

by Trefis Team
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World’s leading antivirus software company, Symantec (NYSE:SYMC) is all set to release its Q3’16 earnings on February 1. (Fiscal years end with March.) Symantec’s revenue has been on a downward trajectory for the last few years because of both sluggishness in the consumer security software market and rising competition from McAfee and smaller players. In Q2, Symantec was able to revive its growth to some extent with the help of positive synergies from Blue Coat, a cloud security company, which Symantec acquired in August. The inclusion of Blue Coat revenue is likely to have a positive impact on Symantec’s Q3 earnings as well, and Symantec will also benefit from the integrated technology sharing with Blue Coat. Apart from this, there have been significant product launches and upgrades by Symantec in Q3 which are likely to have a positive impact on its earnings.

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New Upgrades And Bigger Set Of Threat Data To Attract New Customers

  • In Q3, the company launched ‘Symantec Endpoint Protection 14‘ which incorporates artificial intelligence and machine learning techniques for threat detection and elimination. This advanced endpoint protection suite has also been powered by the cloud.
  • Symantec and Blue Coat started sharing threat telemetry in Q3, which enables both Symantec and Blue Coat to share the new threats detected by their respective platforms with each other over cloud. According to Symantec, it is now preventing 500,000 extra threats everyday, and it claims to have the world’s largest and diverse set of threat data now.
  • Amidst growing mobile usage, Symantec also launched its latest version of its Mobile Security app for Android phones which includes app adviser and security report card features.
  • The new innovations play a vital role in attracting customers and it will be crucial to note the benefits of these new launches and updates, especially on the consumer business of Symantec which has been weighing on the growth of the company.

Continued Synergies From Blue Coat Acquisition

Symantec completed the Blue Coat acquisition in August last year, and synergies from that deal helped Symantec exceed its revenue and EPS guidance in Q2. However on a GAAP basis, only half of Blue Coat’s revenues were embedded into Symantec’s top line whereas 2/3rds of costs were incurred to generate that revenue. This was because of different reporting periods of the two companies. Q3 will be the first quarter when full synergies from Blue Coat will be reflected in Symantec’s enterprise security results, which is likely to add a significant value to both the top line and bottom line this time around.

Prior to the acquisition, Blue Coat’s annual revenues as of fiscal year ended April 2016 were $598 million.
Apart from Blue Coat, Symantec is in the process of acquiring Lifelock, whose domain lies in identity theft protection. This is a move to stabilize the struggling consumer division as Lifelock’s revenues will be added to the consumer business of the company. Lifelock’s acquisition is expected to be completed in Q4.

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