Symantec To Cut 1,200 Jobs, Close Offices After Q4 Sales Miss
Symantec ( SYMC ) is cutting 1,200 jobs and closing a quarter of its offices as part of a broad $400 million cost reduction plan, the No. 3 cybersecurity firm announced Thursday as it reported fiscal Q4 sales that missed Wall Street views. On Friday, William Blair analyst Jonathan Ho said he was “perplexed” by the cuts at a time when older, legacy players like Symantec need to work to catch up with next-generation vendors such as Palo Alto Networks ( PANW ). “We are perplexed at how the company plans to reposition itself as a next-generation security player and reaccelerate growth, while simultaneously reducing spending and headcount,” Ho wrote in a research report. But he called the strategy “ambitious” and maintained his market perform rating on Symantec stock. In morning trading on the stock market today , Symantec stock was up a fraction, near 17. Shares began forming a handle on March 21, but they have since fallen 10%, matching an equal decline in IBD’s 26-company Computer Software-Security industry group. For its fiscal Q4 ended April 1, Symantec reported $873 million in sales and 22 cents earnings per share minus items, down a respective 6% and 24% year over year, but in line with the company’s preannouncement. Both metrics lagged the consensus of 29 analysts polled by Thomson Reuters for $878.7 million in revenue and 23 cents EPS. Symantec’s $3.6 billion in fiscal 2016 sales met the consensus model, but $1.03 EPS ex items missed by a penny. On a year-over-year basis, the measures fell 10% and 21%, respectively. Adjusting for currency, consumer sales fell a respective 7% and 9% during fiscal Q4 and fiscal 2016, leading 4% and 2% declines in enterprise sales. Symantec blamed the enterprise decline on a shift in customer spending toward subscriptions and away from licenses. Ho said the accelerating migration to next-generation subscription products disfavors a legacy player like Symantec. “We remain concerned that the long-term transition away from legacy antivirus to next-generation solutions may be happening at an accelerating pace, which could be a headwind to Symantec’s legacy business,” he wrote. Current-quarter guidance for $865 million to $895 million in sales and 24-26 cents EPS minus items would be down 4% at the midpoints. For fiscal 2017, Symantec guided to $3.49 billion to $3.58 billion, which would be down 2% at the midpoint but better than the 10% decline in fiscal 2016. Symantec’s job cuts represent about 9% of its workforce and will save about $100 million, CFO Thomas Seifert told analysts on the company’s earnings conference call late Thursday. As of Thursday, Symantec’s 11,223 headcount was already down 43% from a year ago. The company hopes that closing 25% of its facilities will save another $35 million. The company also plans to trim target service agent and IT costs “stranded” after the Veritas divestiture, and it is reining in $100 million in spending. Symantec early this year completed the sale of data storage software maker Veritas to a group led by private-equity firm Carlyle Group ( CG ) for about $5.3 billion after taxes.