Analysts were surprised by the decision, warning it bodes badly for Symantec's turnaround effort. Shares of the security and storage specialist were off 10.07% at $18.80 in pre-market trading. Symantec's stock is down 14.81% over the last 12 months.
FBR Capital Markets Analyst Daniel Ives described Bennett's termination as "jaw dropping" in a note released on Friday. "Despite a few speed bumps fundamentally over the past few quarters, and March guidance below expectations, we believe Mr. Bennett was viewed as key to the turnaround story at Symantec, and we think this abrupt changing of the guard could potentially lead some investors to throw in the "white towel" as it represents a big step backward in the company's recovery process," he wrote.
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Bennett's termination marks the company's third CEO change in just over five years. Former Intuit (INTU) CEO Bennett took the company's reins from Enrique Salem in July 2012, vowing to revitalize the company, which has long been criticized for poor execution. In January 2013 he announced his turnaround plan for the company, which involved streamlining, a complete shift in the company's sales coverage model and a focus on 10 core areas, including information-security services, security gateways, data-center security and storage.
"While Mr. Bennett had only unveiled his new strategic direction for Symantec in January 2013, it appears the board was expecting a faster transition toward improved market positioning and growth, an Everest-like challenge, in our view, after years of missteps (e.g., acquisitions, execution issues)," wrote FBR Capital Markets' Ives.
During an interview in November, Bennett told TheStreet that he had underestimated the impact of the company's massive restructuring effort. Nonetheless, he said that he remained confident in his Symantec turnaround plan.
Bennett's termination prompted Jefferies to downgrade Symantec to 'hold' on Friday. "Following the abrupt CEO change, uncertainty around the direction and timeline for the next phase of the strategy will grow," wrote Jefferies analyst Aaron Schwartz, in a note. "The CEO change comes at a time when the implementation of the new strategic direction is still fairly early and follows several other senior management departures."
Schwartz added that deterioration in Symantec's morale and execution is a risk, citing the company's "uncertain" strategic and operational direction.
Michael Brown has been appointed as Symantec's interim president and CEO while it searches for a permanent replacement for Bennett. Brown, the former CEO of Quantum Corporation, joined Symantec following its merger with Veritas in 2005.
Bennett was the architect of Symantec's so-called "5/30 plan" - a roadmap to achieve 5% revenue growth and a 30% margins target by fiscal year 2017 that forms the cornerstone of the company's turnaround strategy.
Symantec reiterated its commitment to the 5/30 plan in the statement announcing Bennett's departure, and also reconfirmed its fiscal fourth-quarter guidance.
Bank of America Merrill Lynch, however, has warned that the CEO's termination further jeopardizes the 5/30 plan, and lowered its Symantec price target to $17 from $18 on Friday. "Our new $17 PO is based on a 15% probability the 5/30 plan will go as planned (vs 25% previously), given our lower level of confidence following the termination of the CEO," wrote Bank of America Merrill Lynch analyst Kash Rangan.
--Written by James Rogers in New York.
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