Symantec gave investors some encouraging signs this week, posting a decent set of quarterly results that suggests it has quickly left behind the funk it found itself in the last few quarters.
The security and storage software company also gave guidance for the start of its new fiscal year that was above analysts’ estimates, the good news mitigated somewhat by changes in its contracts with PC makers that will hurt earnings.
We believe we have entered 2008 with the most difficult part of our transformation behind us, chief executive John Thompson said on a conference call with analysts.
The company posted a profit for the quarter ended March 30 of $61m, down from $119m a year ago, on revenue that was up 5% at $1.36bn. The analysts’ consensus estimate had had Symantec’s revenue dropping to $1.27bn. Earnings of $0.24 per share beat estimates by four cents.
For the year, the company reported a net income of $404m, more than double the 2006 level. Revenue was $5.20bn, also up 5%.
In previous quarters, Symantec had not performed as well, due to a combination of problems including swallowing its Veritas acquisition, changing its accounting method to defer more revenue onto the balance sheet, new competition, a slow-down in the antivirus market, and poor storage software sales.
Looking forward, the company expects revenue for the current first fiscal quarter of between $1.275bn and $1.305bn, and EPS between $0.18 and $0.20. For the year, it expects revenue between $5.59bn and $5.69bn, with EPS between $1.10 and $1.15.
The revenue guidance is ahead of what Wall Street had been expecting, but the earnings predictions are a little lower. The main reason given for the EPS shortfall was a change it how it will account for expenses relating to its prebundling of antivirus on computers from the likes of Dell or HP.
Under some new partnership deals, it will start accounting for these costs as operating expenses rather than costs of goods. Chief financial officer James Beer characterized this as an accounting issue rather than an economic one.
The company is placing some hope on its forthcoming Hamlet client security software to drive some growth later this year. Hamlet will be a combination of pretty much all the security clients that Symantec has built and acquired over the years, designed for enterprise users.
Enterprises are crying out for this kind of client, which will reduce the number of endpoint agents that need to be managed and the number of vendors they have to deal with, Symantec reckons. Because Hamlet will be upgradeable with extra functionality, the company says it will be able to charge a higher average price.