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Symantec secures profit rise as revenues fall

Swings meet roundabouts

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The good ship Symantec has adjusted to the recession and is making 19 per cent more profit despite three per cent lower revenue.

For its second 2010 quarter revenues were $1.47bn; they were $1.52bn a year ago, while net income was $150m, compared to $126m previously.

The $24m profit increase was down mostly to cost-cutting. Sales and marketing expense was $597m but is now $576m, and R&D costs were $219m andt have reduced to $210m. This gives us a $30m gain straight away. Sound familiar? These actions echo those of Quantum.

Symantec's CEO Enrique Salem called this a solid result, noted that consumer product revenues were good, and said Symantec was making "initial progress in SMB security" which was pleasing. There's more potential there.

It wasn't so good elsewhere; this being a swings and roundabouts story, with the storage and server management segment, representing 38 per cent of total revenue, declining nine per cent year-over-year. In comparison the consumer segment, 31 per cent of total revenue, increased six per cent year-over-year, hence Mr Salem's pleasure.

Geographically Europe, the Middle East and Africa stands out as it, 31 per cent of Symantec's revenues in the quarter, declined five per cent year-on-year. Asia-Japan revenues increased five per cent while the Americas declined four per cent.

Revenue for the next quarter is expected to be up slightly, between $1.48bn and $1.51bn. The Symantec cash generation machine is ticking over nicely and no dramas can be seen ahead.

Symantec, converged IT stacks and the cloud

We're seeing major systems vendors moving to a one-stop-shop model with integrated server, system software, storage and networking offerings. Symantec's senior product marketing director, Matthew Lodge, was at SNW in Frankfurt and was asked about customers' willingness to buy software from an independent software vendor in the future.

He said customers will still need multiple operating systems and hardware support. They won't move to single IT stack environments. They will have their legacy products and server virtualisation is becoming multi-vendor with Hyper-V becoming more important. Against this background "customers will still want to buy layered software" from independent software vendors.

Storage arrays and system software applications are moving to offer replication and snapshots, so will customers still need backup software? Lodge said: "Applications building backup into their offering means just another backup platform... [and] with snapshots there's no catalogue."

That means customers can't easily find out what's in a snapshot. Adding a catalogue to a snapshot would mean the snapshot process has to know about files and block-access storage arrays don't. "It comes down to management," Lodge explained. "You need to manage backups and protected data day-to-day and we already have an application that does that."

What about the cloud? "Backup Exec can already backup to the Symantec Protection Network. NetBackup will be able to do this in the future." There's no committed timescale for that yet.

He was asked about Symantec and Huawei Symantec, its joint venture with hardware-manufacturing Huawei: "We think hardware is very important and a lot of customers want to consume software as part of hardware/software appliances. But we don't see the need for an exclusive relationship."

There will be no investment in a hardware vendor such as Dell, no coming together with any hardware vendor in that way. Symantec says it has an open approach to IT hardware vendors.

However, the Huawei-Symantec JV says it is a global supplier, and that includes North America, where it does not have a presence yet. If and when it does come to North America then Symantec may well find its relationship with currently supportive hardware vendors, such as NetApp and Dell, under tension because the JV will be competing with them.

So long as Huawei-Symantec is a niche geographical player, which it more or less is now, things are OK. But as it grows and if it enters the USA, then Symantec may have some hard decisions to make. For example, is the JV's presence in the USA worth the loss of sympathetic relationships with Dell, NetApp and others? ®

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