Thursday, July 26, 2012

Status and Future of Symantec

It has to be a sad day when you lose your CEO title and the company stock has its biggest gain since July 2001,   17%.  Symantec replaced Enrique Salem with board chair Steve Bennett on Wednesday.  Symantec stock has been dropping steadily from a 52 week high of $19.81 to a recent low of $13.06.  As of 12:50 Eastern Standard on 7/26, $15.40 (post Salem removal).

"While progress has been made over the last three years in many areas, it was the board's judgment that it was in the best interests of Symantec to make a change in the CEO," said Steve Bennett, chairman, president, and CEO.  Bennett had been running the show at Intuit from 2000 to 2007 before joining Symantec several years ago.  You can't call the Salem removal a witch hunt. It was time for a change.

Below are some 2012 Q1 revenue figures for Symantec

  •     GAAP Revenue of $1.668 billion
  •     Non-GAAP Operating Margin of 26.1%
  •     Non-GAAP Earnings per Share of $0.43
  •     GAAP Deferred Revenue of $3.745 billion
  •     Cash Flow from Operations of $340 million

However, the GAAP revenue was up only 1 percent year-over-year and up 4 percent after adjusting for currency.  Income actually dropped, from $191 million to $172 million

Symantec’s 5-year stock high was in August 2008 at around $22.  Their 5-year low was in October 2008, at around $11.  Note a good year for them.  The fact that the stock is currently $14 demonstrates how stagnant the company has been over the last several years.

Symantec’s performance in a  Gartner  Magic Quadrant  is mixed.  They’re not in the Leader’s section of Gartner’s Magic Quadrant for Mobile Data Protection (three competitors are).  They’re a Challenger for Secure Web Gateways (five competitors are in the Leaders portion).  They are the Leader for Data Loss Prevention (with five other companies) and for Endpoint Protection Platforms (with four other companies).  Being in the Leaders portion of a Gartner Magic Quadrant can be screening criteria for companies.  Gartner takes great care in a document explaining how to interpret a  Magic Quadrant. They state  that companies whose products are  in the Challenger, Visionary or Niche sections  of the quadrant may be the best solution for your needs.  Nonetheless, a common sales presentation line is, “And they’re in the Leaders portion of the Gartner Magic Quadrant for ‘fill in the blank’”.

In the OPSWAT June” Industry Market Share Analysis Report”, Symantec is fourth in global  market share, behind Avast, Microsoft,  and ESET. Symantec has 10.3% of the market. They are just ahead of AVG Technologies and Avira.  In North American, Symantec is  second behind Microsoft with 15.1% of the market.

Both McAfee (until their acquisition by Intel a couple of years ago) and Symantec have been aggressive in making acquisitions in the last decade.  Possible reasons -  trying to be CA West, expanding product portfolio, plugging gaps in the portfolio,  needing to keep the stock price up, revenue of existing core products stagnant, “buy” decision winning out over “make” decision.  Interestingly enough PGP (a leader in encryption technology), and currently owned by Symantec, was once owned by McAfee.   Buying for the sake of buying doesn't cut it. Enterprise customers and analysts want some visibility into the rationale and roadmap for these.

Depending on the pundit, Symantec should keep leading storage management vendor Veritas.  Alternatively, Symantec should sell Veritas.  If the management team hasn’t figured out how to best integrate   Veritas into the product mix after eight years, spin the company off.  Sell it another company or see if an equity firm like Thoma Bravo is interested.  Thoma Bravo purchased Secure Web Gateway/WAN company Blue Coat Systems and recently sold SonicWall to Dell for about $1.2 billion.   

The management team/existing culture may be one that has lost its mojo.  When their streak of winning VB100 awards was broken a couple of years ago,   the company stopped being tested by Virus Bulletin .  With testing organization AV-comparatives, you can’t choose (cherry pick) which tests to participate in .  So, Symantec is not one of the twenty two companies included in 2012 AV-Comparatives testing.  This doesn’t benefit Symantec’s customers or their channel partners.  Symantec still participates in AV-test testing and scored 15 out of 18 in March/April certification testing

Several  years ago, a Symantec marketing  employee chided  companies utilizing the freemium model.  He  mustn’t have realized that Symantec owns PC Tools, another freemium company.  Unfortunately, PC Tools received only one star in AV-comparatives’ most recent Retrospective/Proactive Test (July 2012). 

Some Thoughts
  • More risk taking.  Reward employees and business units who do that.  Make sure that there are employees who know how to and are comfortable doing this. Bring aboard employees who can do this.
  • More  cloud.  Symantec was slow to the game.  Competitor Trend Micro was early. As was Panda. The channel is becoming more comfortable offering cloud and SaaS based solutions. 
  • Further embrace   VM technology.  The fact that Symantec will be at VMWorld in San Francisco in August and in Barcelona in October are good things. Symantec currently offers  a number of VM solutions. 
  • Embrace BYOD - Bring Your Own Device is the acronym du jour.  While Symantec offers mobile and tablet security solutions under both the Norton and Symantec brands, they need to be more visible in promoting these.  BTW – “Protect your stuff” is an interesting tag line in the Norton line but…
  • Pretend you're not one of the 800 pound gorillas. For years, Silicon Valley commuters driving north on 101, would see a Symantec sign as they drove through Santa Clara. If they raised their eyes a little. They'd see that this was virtually next door to McAfee headquarters.  A nice friendly competitive poke. 

A strategy of placing a huge number of yellow boxes in brick office supply stores no longer suffices.  Both Symantec and McAfee   have come to this conclusion in the last couple of years.  Instead of huge, the number is still  “a lot”.  Webroot was using this strategy for a while at Best Buy when they were the “recommended choice” of the Geek Squad (unless you asked them off the record!). Their box count is down dramatically.
From a July 25 article in CRN, "The security space is evolving so rapidly that companies that stick with old ways of doing business are going to lose their relevance," said one East Coast channel partner on condition of anonymity. "Symantec has been skating on its reputation for a long time, and that has cost them big time. Maybe this change will help them get their house in order."

From an irreverent perspective, it may be time for Symantec to  tone down the yellow color.  “Men usually perceive yellow as a very lighthearted, 'childish' color, so it is not recommended to use yellow when selling prestigious, expensive products to men – nobody will buy a yellow business suit or a yellow Mercedes.”

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