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7/29/2005
10:15 AM
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Symantec Reports Solid Numbers, But Lowers Future Projections

Red flags include the decline of the US dollar's value and the imminent change of its consumer-selling model to eventually adopt a software-as-a-service model.

Symantec kicked off fiscal year 2006 with an earnings report that showed the company's achieving robust results, despite being in the midst of an intricate integration with Veritas. A number of market factors, however, are causing the company to lower expectations for upcoming quarters.

For the quarter ended July 1, 2005, Symantec posted revenue of $700 million, a 26 percent increase over the same quarter last year. GAAP net income was $199 million, up from $117 million for the same quarter last year. Earnings per share were 27 cents, up from 16 cents for the year-ago quarter. The results beat Wall Street's profit estimates, but fell roughly $12.3 million short of the market's revenue projections.

In a conference call with analysts and media, Symantec chairman and CEO John Thompson credited a focus on execution as providing solid results during a hectic time for the company.

"All our geographic regions posted 20 percent or better revenue during the quarter, and we're very pleased with our global enterprise growth," he said. "I'm excited about the prospects for the new Symantec, and we'll continue to assess our portfolio with an eye toward continuing revenue growth."

Symantec's worldwide enterprise business -- including enterprise security, enterprise administration and services -- represents 49 percent of total revenue and is growing 23 percent year-over-year. The company's enterprise-security business accounted for 38 percent of total revenue and grew 26 percent; the enterprise administration business was 10 percent of total revenue and grew 10 percent; and the services business represented 1 percent of total revenue but grew 85 percent. Symantec's consumer business represented 51 percent of total revenue and grew 28 percent.

But Thompson also cautioned that the company has lowered its forecast for the rest of the year due to factors that include the decline of the US dollar's value, the company's recently announced plan to repurchase stock and the imminent change of its consumer-selling model to enable the eventual adoption of a software-as-a-service model.

The company scaled back its revenue projections from $5.3 billion to $5.1 billion. Minus $279 million in deferred revenue from Veritas, the company's revenue for the year is now expected to be $4.85 billion.

"These alterations reflect the realities of a changing market," Thompson said. "We'll announce the specifics of the services changes as we always do, only after we've spoken to our channel partners."

The company broke out the Veritas results, reporting as a stand-alone company since the two vendors have been officially operating as one for less than a month. Veritas reported revenue of $529 million for the June quarter, up 9 percent year-over-year. Operating expenses were $407 million, or 77 percent of sales.

"We're very pleased with the revenue-generating performance of our teams while they balanced that with the integration tasks," says Gary Bloom, former Veritas CEO, who is now Symantec's vice chairman and president. "Our strong execution of the merger further heightens our value proposition to customers. The first three weeks of the integration are going well."

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