H-P Rumor Heats Symantec

"When we first heard about this, we did research that showed it wasn't very likely," says Williams. "That said, you never know what is possible within corporate minds since strategies change all the time. But we found that it didn't make as much sense for such a deal."

Symantec declined to comment on what it said is "rumor or speculation."

The company faces significant pressure from Microsoft, which recently entered the consumer security business. Microsoft's consumer antivirus and backup product, Windows OneCare, released in May has about 1.5% of the retail channel market share, according to researcher NPD group.

"Our take is that Symantec over time is vulnerable to competition from Microsoft that will erode its antivirus business, which has been the driving force making the stock a winner in last five years," says Williams.

Still, some analysts such as Morgan Keegan's Brian Freed believe that the company is undervalued. "Our relative valuation analysis implies a fair value of $22.35 per share, net of cash," he wrote.

Freed compared Symantec with rivals McAfee(MFE Quote), Check Point Software(CHKP Quote), Citrix(CTXS Quote) and CA(CA Quote). Based on the discounted cash flow analysis, he suggested a fair value of $24.64 to $26.25 a share.

"Taking an average of the two valuations, we come up with a fair price of approximately $23.93, which is roughly a 20% premium to current levels," the report said.