The market for IT services related to security is phenomenal as data is growing exponentially and security constraints are becoming more and more stringent for any user. Symantec (SYMC, Financial) is one such company that provides these services.
The probable customer of the company can vary from a smartphone user to high-end data centers. Since security is important for users of all sizes, it lends a hand to influence the top and bottom lines of companies like Symantec.
Symantec primarily provides various solutions in five independent segments like storage and server management, services securities, consumers and others.
The stock price might have dropped by 20% over the last 6 months, but this might be the right time when one can think of buying Symantec.
Impressive quarter
The company recently released its Q1 2015 earnings, the results were fair enough and did record year-over-year revenue growth. It posted revenue of $1.74 billion, which is a growth of 2% year over year. Various other financial metrics recorded growth. An impressive growth in the bottom line that increased by 50% year over year to record $236 million as compared to $157 million in the same term last year. The company has also topped Wall Street's consensus view on earnings for consecutive quarters.
Thomas Seifert, executive vice president and chief financial officer, said, “We’re pleased with the solid results in the quarter, which were driven by productivity improvements in both our new business and renewals teams. We have eight revenue and efficiency initiatives in place that we expect will help us continue to build momentum into next year. We’ve identified three efficiency initiatives that we believe will ramp during the second half of the fiscal year: optimizing our Norton business, streamlining product support, and reducing our global footprint.”
Markets that will benefit Symantec
Once known only as a maker of Norton antivirus, the company is now fully into software, focusing on various other growth areas.
Cloud-based security is a segment where Symantec is looking for growth. This segment was globally worth $2.1 billion in 2013 and is projected to reach $3.1 billion by 2015.
The information service revenue did shrink but is expected to grow for Symantec as it re aligns its product portfolio by being more flexible. One of the reasons behind the revenue drop in this segment was due to declining PC sales. Symantec expects to offset this as it focuses on big data and data center markets in the future.
If further plans to broaden its horizon of service by not only limiting itself to datacenter, but now its focal point is also on protecting and managing digital information.
Storage management software, again, has huge potential with businesses moving to the cloud and data virtualization gaining steam. Analysts forecast this market to grow at a CAGR of 4.36% over the period of 2012-2016. Other major players in this segment are EMC Corp (EMC, Financial), IBM (IBM, Financial), and NetApp (NTAP, Financial) that provide stiff competition to Symantec.
This market, as a whole, grew 4.7% in 2013 and reached $15.7 billion revenue. Considering the CAGR, we surely will witness stronger revenue by 2016. With European countries recovering, Symantec looks well-placed for the long run.
Dividend and repurchases
Repurchase programs and dividends are always good. In Q1 2015, Symantec declared a dividend of $0.15. The company had also declared earlier, to implement share repurchase programs for 5.3 million shares at an average price of $23.76 and has plans of share repurchase programs that will amount to $783 million.
Conclusion
With the growing market for security products, Symantec looks like a good buy for the long run. So, investors should definitely consider this company for their portfolio.
