Will Symantec Be Able to Hold Investor Interest in 2015?

Symantec Continues to Disappoint Investors in Fiscal 2015

(Continued from Prior Part)

Faltering revenue growth is shaking investor confidence

As we’ve already seen in this series, Symantec’s (SYMC) revenues fell 6.6% on a year-over-year basis to $1.5 billion. Fiscal 4Q15 marks Symantec’s third consecutive quarter of year-over-year revenue decline.

The company is well known for its Norton antivirus software and a diversified portfolio of security software offerings. But the company is still struggling to achieve revenue growth. This is a major concern since the global security services market is expected to grow in the future. According to Sandler Research, the global security services market is expected to grow at a CAGR (compound annual growth rate) of 10.13% from 2014 to 2019.

Hope for Symantec’s Enterprise Security segment

As we’ve already seen, Symantec’s overall performance in fiscal 4Q15 and fiscal 2015 failed to meet investor expectations. However, we should also take a close look at Symantec’s reallocation of its R&D (research and development) investments to potential growth areas like its Enterprise Security software segment.

Despite Enterprise Security’s degrowth in fiscal 2015, its two subsegments—Endpoint Protection and DLP (Data Loss Prevention)—successfully achieved 5% and 6% year-over-year growth, respectively. This growth generates some hope that these subsegments may be able to put Symantec’s Enterprise Security division back on track for revenue.

According to the 451 Group, Symantec leads the DLP market with a 47% market share, as the above chart shows. It’s followed by Intel’s McAfee (INTC) with an 18% market share and EMC (EMC) with a 4% share. Technology behemoths Microsoft (MSFT) and IBM (IBM) are trying to enter this rapidly growing market.

According to the 451 Group, “Symantec has the most-cited endpoint security (antivirus) solution in the enterprise, at 41% in use, as well as the leading data-loss prevention ([or] DLP) product.”

If Symantec manages to hold or expand its presence in this space, there’s a strong likelihood that the Enterprise Security segment will revive. Symantec’s Information Management segment should split off by October 2015, which will put pressure on Symantec to focus on Enterprise Security to drive its revenue growth. In its 4Q15 earnings release, Symantec shared that the company released 41 new Enterprise Security products in fiscal 2015.

1Q16 expectations

For 1Q16, Symantec expects revenue and EPS (earnings per share) to be $1.5 billion to $1.54 billion and $0.41 to $0.44 per share, respectively. For fiscal 2016, Symantec expects revenue and EPS to be in the range of $6.21 to $6.35 billion and $1.80 to $1.90, respectively.

If you’re bullish about Symantec, you can invest in the Technology Select Sector SPDR Fund (XLK) to gain exposure to Symantec. XLK invests about 0.41% of its holdings in Symantec.

Browse this series on Market Realist:

• Part 1 - Symantec Misses Wall Street Expectations for Fiscal 4Q15

• Part 2 - How Did Symantec’s Enterprise Security Perform in 4Q15?

• Part 3 - Symantec’s Decent Cash Flow Supports Dividend Policy in 4Q15