Symantec Earnings: Consumer Security Business Boosts Top Line Growth, Profits

by Trefis Team
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Symantec (NYSE:SYMC) announced its fiscal third quarter 2018 earnings on January 31, reporting a 16% increase in net revenue, primarily driven by strength in the consumer security business. In recent quarters, the company has reported strong growth in revenues driven by additional revenues from the $4.7 billion Blue Coat acquisition in mid-2016. In the June quarter last year, Symantec acquired Israeli company Fireglass for an estimated $250 million. This has helped Symantec enhance its portfolio in the ransomware, malware and phishing threat domains. The company has also enhanced its focus on the enterprise cloud security market. Symantec refreshed its cloud security product portfolio at the end of FY’17.

We have created summarized Symantec’s Q3 FY’18 results on our interactive dashboard where you can also change expected revenue and income margin figures for Q4 FY’18 to gauge how it will impact expected EPS for the quarter.

See our complete analysis for Symantec

Key Trends

Symantec’s enterprise segment has been a key growth driver in recent years. Enterprise revenues were up 26% y-o-y to $1.3 billion through the two quarters of fiscal 2018. However, this slowed down in the third quarter with roughly flat revenues over the comparable prior year period. We forecast Symantec to defend its share in the enterprise security market in the coming years, with revenues expected to grow at mid to high single digits through the end of our forecast period.

On the other hand, Symantec’s consumer sustained solid growth through the December quarter. Consumer security revenues rose 47% on a y-o-y basis to $584 million for the quarter. The Consumer segment has been given a boost by the acquisition of LifeLock in February last year, and partially by the Blue Coat acquisition in 2016. Symantec successfully achieved $300 million in cost synergies from Blue Coat and expects another $150 million through FY’18.

Symantec’s consumer security business is typically higher-margin in nature relative to the enterprise security segment. With a strong performance from the consumer segment, the company-wide non-GAAP operating profit margin stood at 38.2% for the quarter, up 7 percentage points from the comparable prior year period.

March Quarter Guidance

Symantec’s net revenue for Q2 FY’18 could increase by 6% to under $1.2 billion, with the consumer segment (and acquisitions) largely driving growth. In addition, cost synergies from acquisitions are expected to continue to drive operating income in the coming quarters. Management expects operating income to increase over 32% y-o-y to $400 million with margin expanding by almost 6 percentage points.

 

 

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