Symantec suffers on weak forecast, CFO exit

Security software maker Symantec Corp. stumbled in its second quarter, reporting a large loss on charges associated with its Veritas acquisition and warning that its results in the current quarter will be worse than previously projected. The company also announced the surprise retirement of its chief financial officer (CFO), Greg Myers.

The late shipment of Symantec’s Norton Internet Security 2006 suite, released in September, and a tough competitive environment for enterprise software sales crunched Symantec’s sales results and forecasts, the company said in a release Tuesday.

On a non-GAAP (generally accepted accounting principles) basis, Symantec’s revenue for its second quarter, ended Sept. 30, was $1.2 billion, in line with the consensus estimate of analysts polled by Thomson First Call. That figure includes $136 million of deferred revenue associated with Symantec’s accounting for its July acquisition of storage software maker Veritas. In last year’s second quarter, Symantec and Veritas had combined revenue of $1.1 billion.

Symantec had a net loss for the quarter of $251 million, or $0.21 per share, weighed down by charges related to its Veritas deal.

For its full 2006 fiscal year, Symantec is now predicting revenue of $4.2 billion. On a non-GAAP basis that accounts for effects from the Veritas deal, the company predicts revenue of $5 billion, below the $5.14 billion consensus analyst forecast. Symantec’s per-share, non-GAAP earnings predictions for the 2006 fiscal year and its ongoing third quarter, respectively, were $0.99 and $0.25, each a penny a share below analysts’ expectations.

Shares of Symantec (ticker symbol: SYMC) plunged 19 percent Wednesday to close at $19.37 on the Nasdaq exchange as investors reacted to the weak sales forecasts and the CFO’s exit. Myers is the second top executive to leave Symantec recently, following former president John Schwarz’s September departure to become chief executive officer at Business Objects SA. A half-dozen financial firms downgraded the stock on Wednesday.

Enterprise customers could benefit from Symantec’s determination to perk up its sales in that market. “Management stated that they would be much more aggressive on price in the enterprise [antivirus] market going forward. This could lead to a pricing war,” Citigroup Research analyst Tom Berquist wrote in a research note.

Consumers, however, aren’t likely to see price breaks. While Symantec’s executives bemoaned the late shipment of its Norton suite, they expressed confidence in the brand and its ability to expand sales.

REFERENCES: Business Objects snags Symantec exec for new CEO, Sep. 12, 2005 Symantec updates consumer security lineup, Sep. 26, 2005