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Symantec: WA-HEY... profits. But security firm's sales won't budge

Salesforce and channel reorg pays off

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New CEO equals new broom equals same old dust; just looking at Symantec’s latest quarterly numbers we see it’s still stuck in the $1.6bn - $1.8bn range but is getting a bit more profitable.

For its third quarter, ended 27 December last year, the software giant’s revenues were $1.7bn, 5 per cent down on the year-ago $1.79bn and up 3.5 per cent on the previous quarter. Profits were $283m versus $212m a year ago and $241m a quarter ago.

This is better. Profit as a percentage of revenue was 9.2 per cent two quarters ago, and 14.7 per cent last quarter. Now it’s 16.6 per cent as CEO and president Steve Bennett wrings wastage out of the good ship Symantec and re-organises the sales force to sell more effectively.

Bennett’s ready-prepared remarks said: ”We benefited in the December quarter from improved total business activity after separating our sales organisation into dedicated new business and renewal teams earlier this year.”

He added this: “Although revenue declined, we exceeded our expectations in operating margin and EPS. While we won't be pleased until total business activity is growing again, I'm happy with our financial results given the massive changes in our business."

In his view: “We are where we expected to be at this point in our 3-to five-year transformation, as we continue to make the changes needed to achieve our long-term targets." Yes, well, he can say that but the main two quarterly numbers don’t yet completely show it.

Underneath this financial surface Symantec says:

  • Operating margin was 23.8 per cent, up 680 basis points year-over-year and up 625 basis points after adjusting for currency.
  • Net income was $283m, up 31 per cent year-over-year.
  • Diluted earnings per share were $0.40, up 29 percent year-over-year.
  • Deferred revenue as of December 27, 2013 was $3.59bn, down 6 per cent year-over-year and down 5 per cent after adjusting for currency.
  • Cash flow from operating activities was $329m, down 29 per cent year-over-year.

It’s a bit mixed.

Bennett assumed the CEO chair in July 2012. A three- to five-year transformation starting from, let's say, January 2013 means transformation ends in the 2016-2018 period. Weary Symantec investors may have to wait until 2018 to see the fruits of Bennett's labours reflected in the share price.

For the full fiscal 2014 year Symantec expects revenues between of $6.66bn and $6.71bn. Last year they were $6.9bn. Down we go a little more but, never mind, Symantec is “where we expected to be at this point in our 3-to 5-year transformation.”

Vulture-eye view

An observation: Symantec is a big, vast, humungous software company with a CEO intent on getting it to "work smarter". It seems to the Vulture’s storage desk that there is no great vision that’s any different from any other software company: big data … internet of things … solving customers’ critical business problems.

Look at this presentation (pdf) to see what we mean.

Where is Symantec going to make a difference, a real difference? Because it’s not through financial engineering or salesforce and channel re-orgs. They’re needed but, if you’re a product company, then where are the problem and product visions that are going to excite people - your own people and customers? Where, inside Symantec, are the Veeams, the Boxex, the Actifios, the Assigras, the Nasunis?

Symantec recently retreated from a cloud initiative.

How is it going to grow? Is Symantec neglecting the "new problems, new opportunities, new products" part of its transformation?

To your storage correspondent, it is beginning to look like that. ®

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