) reported earnings per share (EPS) of 40 cents in the third
quarter of 2013, comfortably beating the Zacks Consensus Estimate
of 33 cents.
Symantec reported revenues of $1.79 billion in the quarter, up
4.4% year over year from $1.72 billion and above the Zacks
Consensus Estimate of $1.73 billion.
Year over year, revenues from Consumer segment grew 2.0%,
Security and Compliance grew 4.0%, while Storage and Server
Management and Services segment revenues increased 9.0% each.
Consumer revenue improved due to up-selling of premium and new
suites to existing customers. Security and Compliance revenue
grew owing to strength in managed security services and
encryption businesses. Higher sales of archiving and net back-up
products led to growth in Storage and Server Management segment.
Higher business critical services unit sales pushed up the
The company generated around 52.0% of total revenues from the
International market, up 6.0% from the year-ago quarter.
Moreover, the Europe, Middle East and Africa region (28.0% of
revenues) grew 6.0% on a year-over-year basis. Asia Pacific/Japan
revenue (contributing around 19.0% of the total revenue)
registered growth of 7.0% on a year-over-year basis. The
Americas, which include United States, Latin America and Canada,
represented around 53.0% of total revenues, and witnessed
year-over-year growth of 3.0%.
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 16.6%, down 90 bps from 17.5% in the
year-ago quarter. Operating margin decreased as a result of
higher operating expenses.
Net income in the reported quarter was $212.0 or 30 cents per
share compared with $240.0 million or 32 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 40 cents per share compared with 39 cents per
share in the year-ago period.
Balance Sheet & Cash Flow
Symantec registered cash, cash equivalents and short-term
investments of $4.3 billion, slightly up from $4.0 billion in the
prior quarter. Long-term debt of the company remained unchanged
at $2.09 billion. Cash flow from operating activities was $463.0
million versus $178.0 million in the prior quarter.
During the quarter, the company repurchased 11 million shares for
an average price of $17.94, totaling $200.0 million.
The company also announced plans to return 50.0% of free cash
flow through share buybacks and dividend payouts over a period.
For this, Symantec authorized a $1.0 billion share buyback
program and initiated dividend payment of 25 cents a share. The
first dividend will be paid in Jun 2013.
There was no explicit guidance disclosed during the earnings
call. But management mentioned that it expects revenues and
deferred revenues for the fourth quarter 2013 to grow 1%-3% year
over year on a constant currency basis.
The company also appointed a new CEO, Steve Bennett, who had been
General Electric Co.
The new chief announced plans to layoff managers and staff across
certain operating divisions in order to boost operating margins.
But on the other hand, management stated that research and
development expenses would rise on account of new product
Symantec has delivered decent third quarter 2013 results with EPS
and revenue surpassing the Zacks Consensus Estimates. The company
also witnessed good geographical as well as segmental revenue
Reduction in tech spending by different government and private
organizations, new/improved offerings from Kaspersky and McAfee
-- (acquired by
)) -- as well as the prevailing economic turmoil in Europe, and
weak PC market will likely dampen the company's business
However, we remain overly positive on Symantec given its
restructuring initiatives (that would boost margins and
eventually earnings), appointment of a new CEO and continuous
Currently, Symantec holds a Zacks Rank #1 (Strong Buy).
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