) reported earnings per share (EPS) of 41 cents in the second
quarter of 2013, comfortably beating of the Zacks Consensus
Estimate of 33 cents. Shares hiked 9.9% in the after-hours.
Symantec reported revenues of $1.70 billion in the quarter, up
1.1% year over year from $1.68 billion and was above the Zacks
Consensus Estimate of $1.66 billion. The revenue growth was
complemented by strength in Security and Compliance revenue and
marginal growth in Services revenue. However, this was partially
offset by weak performances in Consumer and Storage and Server
Revenue from Consumer segment dropped 1.0% year over year and
represented 31.0% of the total revenue. Security and Compliance
segment (around 30.0% of the total revenue) increased 6.0% on a
year-over-year basis. Storage and Server Management segment
represented around 35.0% of the total revenue and reported a
year-over-year decrease of 2.0%. Lastly, the Services segment
represented 4.0% of the total revenue and grew approximately 2.0%
on a year-over-year basis.
The company generated around 51.0% of the total revenue from the
International market and was up 1.0% from the year-ago quarter.
Moreover, the Europe, Middle East and Africa region (26.0% of
revenues) declined 4.0% on a year-over-year basis. Asia
Pacific/Japan revenue (contributing around 20.0% of the total
revenue) registered a growth of 6.0% on a year-over-year basis.
The Americas, which include United States, Latin America and
Canada, represented around 54.0% of the total revenue, and
witnessed a year-over-year growth of 2.0%.
After adjusting for currency conversion, each revenue segment and
geographical regions witnessed year-over-year growth.
Gross margin in the quarter was 83.3%, down 90 basis points (bps)
from 84.2% in the year-ago period. The decline in gross margin
was due to higher costs associated with the company's businesses.
Operating margin was 18.0%, up 100 bps from 17.0% in the year-ago
quarter. Operating margin grew as a result of lower operating
expense, arising from a decrease in selling and marketing
expenses and flat research & development expenses.
Net income in the reported quarter was $193.0 or 27 cents per
share compared with $182.0 million or 24 cents per share in the
Excluding special items like operating expense adjustment,
non-cash interest expense and related tax adjustments but
including stock-based compensation expenses, adjusted net income
in the quarter was 41 cents per share compared with 36 cents per
share in the year-ago period.
& Cash Flow
Symantec registered cash, cash equivalents and short-term
investments of $4.0 billion, flat sequentially. Long-term debt
for the company remained unchanged at $2.09 billion. Cash flow
from operating activities was $178.0 million versus $340.0
million in the year-ago period.
During the quarter, the company repurchased 12 million shares for
an average price of $16.48, totaling $197.8 million.
For the third quarter 2013, the company expects GAAP revenue to
be in the range of $1.72 billion and $1.75 billion, reflecting
year-over-year growth of 0%-2.0%. GAAP EPS is expected in the
range of 17-19 cents, while non-GAAP EPS is expected between 36
and 38 cents. The Zacks Consensus Estimates for the third quarter
and fiscal 2012 are pegged at 33 cents and $1.46, respectively.
Symantec has delivered decent second quarter 2013 results with
EPS and revenue surpassing the Zacks Consensus Estimates. The
company also witnessed a mixed geographical revenue performance.
Symantec expects a sequentially weak EPS, which seems justified
given the plans for additional investments in some operating
Uncertainty over PC sales is going to affect its Consumer segment
throughout the year. Moreover, as smaller companies like
Kaspersky are coming up with better products at regular
intervals, it is intensifying the competition in this segment.
Reduction in tech spending by different government and private
organization, stiff competition from McAfee -- acquired by
) -- as well as the prevailing economic turmoil in Europe will
likely dampen the company's business prospects. Symantec provided
a mediocre guidance and we believe that this could be due to the
above mentioned reasons.
Symantec has a Zacks #3 Rank, implying a short term Hold
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