Business & Finance
News
1/25/2007
01:10 PM
Connect Directly
RSS
E-Mail
50%
50%

Symantec To Slash $200 Million In Costs, Shares Climb

Cuts include reductions in new hires, contractor spending, and travel; facility consolidation; and an unspecified number of layoffs.

Shares of Symantec climbed by 4% in early trading Thursday, a day after the security software maker announced $200 million in cost cuts and beat recently-lowered forecasts.

On Wednesday, Symantec released its fiscal third-quarter 2007 figures for the period ending Dec. 29, 2006, stating earnings of $248 million, down from $282 million in the same quarter the year before. Net income, however, was $114 million, up 25% year-to-year, to 12 cents per share.

Last week, Symantec announced it wouldn't meet earlier third-quarter forecasts, saying then that net income would come in at 10 to 11 cents per share, down from previous forecasts of between 14 and 15 cents. At the time, CEO John Thompson blamed the shortfall on weak performance from the company's Veritas group and a shift by more enterprises to long-term maintenance contracts.

After the announcement, Symantec stock dropped more than 13% in one day to fall to $17.79. Although shares recovered somewhat, Thursday's mid-day price of $18.20 was still down $1.68 from before the restated estimates. As promised a week ago, Symantec on Wednesday also unveiled cost-cutting moves. The entire package will total $200 million and will include reductions in new hires, contractor spending, and travel; facility consolidation; and unspecified culls of the current workforce.

"With a disappointing quarter behind us, we are moving to better align our costs with our new revenue expectations," said Thompson in a conference call with reporters and analysts Wednesday. "I am confident that we have the right strategy in place. However, we must sharpen our execution."

Even so, analysts remained cautious. "The company did announce a cost-cutting initiative, which should further align its cost structure with a lower revenue trajectory over time, [but] unfortunately for Symantec and its investors, it seems that each quarter brings new challenges for both the company and investors, thus thickening the black clouds already hovering over its head," said Daniel Ives, an analyst with Friedman Billings Ramsey, in a research note to clients Thursday.

"While we applaud these cost-cutting efforts, these reductions are gradual and are only expected to impact the FY 4Q07 [March] cost structure minimally," Ives continued. "We are not expecting to see the full impact of these cost-cutting initiatives until FY09 based on our current model."

Among the bright spots in Symantec's filing with the SEC was news that the company's consumer business -- largely based on Norton AntiVirus and Norton Internet Security -- grew 24% year-over-year.

Comment  | 
Print  | 
More Insights
IT's Reputation: What the Data Says
IT's Reputation: What the Data Says
InformationWeek's IT Perception Survey seeks to quantify how IT thinks it's doing versus how the business really views IT's performance in delivering services - and, more important, powering innovation. Our results suggest IT leaders should worry less about whether they're getting enough resources and more about the relationships they have with business unit peers.
Register for InformationWeek Newsletters
White Papers
Current Issue
InformationWeek Tech Digest September 24, 2014
Start improving branch office support by tapping public and private cloud resources to boost performance, increase worker productivity, and cut costs.
Video
Slideshows
Twitter Feed
InformationWeek Radio
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.