Symantec Will Be ‘Very Judicious’ With $5 Bil M&A War Chest: CEO

By | February 5, 2016

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Symantec ( SYMC ) will have a $5 billion M&A war chest by 2018 — but it’s not burning a hole in CEO Mike Brown’s pocket. Brown told investors Thursday that the cybersecurity firm will be “very judicious” in finding the right acquisitions. Cybersecurity stocks were walloped early Friday, and IBD’s 26-company Computer Security-Software industry group plunged 7% after LinkedIn ( LNKD ) and Tableau Software ( DATA ) stocks crashed 40% and 47%, respectively, when both companies gave weak guidance late Thursday. But Symantec stock bucked the trend, giving in-line guidance late Thursday and posting fiscal Q3 earnings that topped Wall Street estimates. In midday trading on the stock market today , Symantec shares were up more than 4%, near 20, after rising as much as nearly 10% early. The company late Thursday also announced a $500 million investment from private equity firm Silver Lake Partners , bumping its capital return program to $5.5 billion — a development that Wall Street analysts called opportune as Symantec’s M&A appetite grows. Ken Hao, a Silver Lake managing partner, joined Symantec’s board. Symantec is undergoing a necessary transition as it attempts to become “leaner and more focused,” FBR analyst Daniel Ives wrote in a research report. Ives reiterated his market perform rating on Symantec stock. Symantec on Jan. 29 completed its sale of data storage unit Veritas to the Carlyle Group for a purchase price of $7.4 billion. Late Thursday, Brown also announced a restructuring effort that aims to cut $400 million from expenses over two years. “We believe the confluence of M&A, aggressive buybacks and a tighter operating model finally puts this company on the right path after a decade of pain,” Ives wrote. “This remains a work-in-progress name, but we are now starting to be more optimistic that better days could be ahead for a ‘leaner and more focused’ Symantec.” And it doesn’t hurt “to have (Silver Lake) in Symantec’s corner,” he added. Customer, Enterprise Sales Decline Fiscal Q3 sales of $909 million and 26 cents earnings per share ex items beat the consensus of 29 analysts polled by Thomson Reuters for $905.8 million and 24 cents. Customer revenue of $414 million and enterprise revenue of $495 million fell 10.2% and 2.8% year over year, respectively, Credit Suisse analyst Philip Winslow wrote in a report. But those measures topped his estimates for $411 million and $492 million, Winslow noted. Current-quarter guidance for $885 million to $915 million in sales and 24-27 cents EPS ex items were in line with Wall Street views for $901.7 million and 25 cents. Eventual acceleration within the customer segment is likely, Winslow wrote. But “the outlook for accelerating enterprise security growth is more uncertain given intense competition across the enterprise security landscape and the endpoint in particular.” Winslow maintained his neutral rating and 25 price target on Symantec stock. Symantec is positioning itself with 12 new product releases in 2016 to build “a strong reputation in the next-generation security market,” William Blair analyst Jonathan Ho wrote. Competitors within that segment include Palo Alto Networks ( PANW ), CyberArk Software ( CYBR ) and Check Point Software Technologies ( CHKP ). Ho reiterated his market perform rating on Symantec stock. Midday Friday, shares of Palo Alto Networks, CyberArk and Check Point were down 12%, 8% and 2%, respectively. Scalper1 News

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