Must-know: ValueAct Capital exits position in Symantec

Overview: ValueAct Capital's notable 2Q14 positions (Part 3 of 6)

(Continued from Part 2)

ValueAct Capital and Symantec

Jeffrey Ubben’s ValueAct Capital added new positions in Armstrong World Industries (or AWI) and 21st Century Fox (FOX). It exited positions in Symantec Corp. (SYMC) and Micros Systems Inc. (MCRS). Top position increases were Microsoft Corp. (MSFT) and CBRE Group (CBG).

ValueAct Capital exited a position in Symantec Corp. (SYMC) that accounted for 1.14% of the fund’s first quarter portfolio.

Symantec is one of the leading providers of security, backup, and availability solutions. It has three operating segments—User Productivity & Protection, Information Security, and Information Management. These operating segments are strategic business units that offer different products and services. They’re distinguished by customers’ needs. Symantec believes that the market for security and management solutions will benefit from upcoming trends. The trends include the emergence of the Internet of Things and transformations due to mobility. The trends also include an explosion of data. This results in the need for a new approach to protect devices, applications, data, and users.

Symantec sees private equity interest speculations

In June, Market Realist reported that ValueAct’s position in Symantec was initiated in the first quarter. Newswires noted the activist fund’s interest in Symantec in April. This was amid news that the antivirus maker’s CEO, Steve Bennett, had been fired. Reports also said that Symantec attracted interest from private equity firms—including Bain Capital, Blackstone Group LP, and Carlyle Group LP. The reports also said the company hired JPMorgan for advice on strategic options and defense against activism.

1Q15 results above expectations

Symantec reported robust results for its fiscal 1Q15. The company said the results were “driven by productivity improvements in both its new business and renewals teams.” Its profit surged 50% to $236 million, or $0.34 per share—compared to $157 million, or $0.22 per share, last year. Revenue increased ~2% to $1.74 billion.

Revenue declines in Asia Pacific and Japan

The company said in its 10Q filing that the Europe, Middle East, and Africa (or EMEA) region experienced the largest net revenue increase. It was followed by the Americas. However, the Asia Pacific and Japan region experienced revenue declines. Gross margins remained flat at 82% during the three months ending July 4, 2014.

A Bloomberg report cited unconfirmed sources. It said that China’s procurement agency issued a directive to government departments to halt buying antivirus software from Symantec and Kaspersky Lab due to security vulnerabilities.

For more details on Symantec’s businesses and fiscal 1Q15 performance, please read Must-know: Symantec Corp’s 1Q15 earnings review.

Continue to Part 4

Browse this series on Market Realist:

• Part 1 - Must-know: ValueAct Capital’s 2Q14 positions

• Part 2 - Why ValueAct Capital starts new position in 21st Century Fox

• Part 4 - Why ValueAct Capital eliminates position in Micros