Ronna Abramson

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Symantec Blows Past Estimates Again

Ronna Abramson

In a repeat of the previous quarter, Symantec(SYMC Quote) reported quarterly results Wednesday that blew away analysts estimates and its own guidance, thanks to strong enterprise and consumer sales.

The Cupertino, Calif.-based security software maker also raised guidance for fiscal year 2003.

Symantec maker reported GAAP net income of $52 million, or 33 cents a share, in the second quarter, compared with a net loss of $11.8 million, or 8 cents a share on a split-adjusted basis, in the same period a year earlier, and net income of $56.6 million, or 36 cents a share, in the first quarter.

Excluding charges, Symantec registered pro forma net income of $59.8 million, or 38 cents a share, in the second quarter, widely surpassing the 31-cent-a-share consensus estimate gathered by Thomson Financial/First Call and the company's own forecast of 30 cents a share. Symantec reported pro forma net income of $42.3 million, or 28 cents a share, a year earlier and pro forma net income of $65.6 million, or 41 cents a share, in the first quarter.

The company said revenue rose 34.2% to $325.2 million from $242.4 million a year earlier and 2.9% from $316 million in the previous quarter. That also surpassed the Wall Street revenue estimate of $307.2 million and the company's guidance range of between $300 million and $310 million.

Symantec, best known for its Norton antivirus products, reported its worldwide enterprise security business, which represented 44% of total revenue, grew 30% compared with the same quarter a year ago. Symantec's consumer business grew 68% year over year and represented 38% of total revenue. Consumer sales were fueled by a 76% year-over-year increase in consumer antivirus sales. The company declined to disclose how much revenue came from three acquisitions that closed in the second quarter.

Symantec said it expects third-quarter revenue to range from $335 million and $355 million and earnings excluding charges to come in at 38 cents a share. Analysts were expecting third-quarter revenue of $337 million and pro forma earnings of 35 cents a share.

For the full year, Symantec raised its revenue estimate by $20 million to $1.3 billion and hiked up its earnings target by 13 cents to $1.55 a share. The Wall Street consensus put fiscal year 2003 revenue at $1.3 billion and earnings at $1.42 a share.

Security has been one of the few bright spots in the software market since the economic downturn, which has led to shrinking revenue in other software sectors. The second quarter marked Symantec's 24th quarter of year-over-year revenue growth, the company said.

"We continue to see customers opting for must-have security technologies like anti-virus and firewall," Symantec Chairman and CEO John Thompson said on a post-close conference call. "The consumer business rocked again."

Thompson said the company's consumer business is not highly correlated to PC sales, which have slumped. Rather, it comes in part from consumers visiting Symantec's Web site to analyze their systems, and 40% to 50% finding that they have no anti-virus protection or software that is outdated.

Yet, with expectations of Symantec's enterprise business growing 30% for the remainder of the year, Thompson added, "It should be clear to everyone this isn't your father's AV [antivirus] company anymore."

Similar to past quarters, Thompson cautioned that he does not expect Symantec to continue to enjoy such high consumer growth rates because of tougher year-over-year comparisons. In an interview after the company's conference call, Thompson said the company is forecasting 35% growth in the consumer business for the full year, which means the next two quarters will include significant drops in their consumer business growth rates. "Our point is while there is still growth in the business, the rate of growth on a sustainable basis is not what we have seen," he said.

While Symantec's consumer antivirus business has helped the company consistently outperform, rival Network Associates also surprised Wall Street last week with strong results.

Intrusion-detection software maker Internet Security Systems followed this week, reporting that earnings swung into positive territory from a loss a year ago.

Shares of Symantec declined $1.48, or 4%, to close Wednesday at $35.56. In after-hours trading, Symantec shares climbed 5.6%