Symantec (SYMC), best known for its Norton antivirus software, has seen its shares drop like a stone in 2007.

At Tuesday's closing price of $17.62, the stock is already down a quick 15.5% for the new year, as management hit investors with a disappointing fiscal third quarter (ended December) report Jan. 24.

The company also said Monday that it's buying systems management software producer Altiris ( ATRS) for $1.03 billion. While Symantec believes the purchase will be slightly accretive to fiscal 2008 (ending March) earnings, investors aren't soon to forget that the stock is down 19.4% since the company paid $10.2 billion for Veritas Software ( VRTS) in 2005.

Symantec is currently on track to see profits decline in fiscal 2007 for the first time in five years, to 96 cents a share. Even so, at 18.4 times full-year earnings, the company trades at a 43% discount to its historical average and a 14% discount to top competitor McAfee ( MFE).

With that in mind, I'm here to answer investors' questions: Should I do it? Has Symantec dug itself a new hole with this acquisition, or has the stock already sold off too much?

The consumer security business still accounts for 30% of the company's business and grew 24% year over year in the latest quarter. But to keep up with declining storage sales, Symantec said last week that it will cut 5% of its workforce and reduce annual expenses by $200 million. Management also pledged to buy back $1 billion (57 million shares) of its stock over time. Even after the Altiris purchase, Symantec still has $2.2 billion ($2.30 a share) of cash on the balance sheet.

And while Symantec has a less-than-stellar record with past acquisitions, Altiris has a strong market position in a rapidly growing area where the company previously had little exposure. Altiris' Hamlet software suite allows users to securely access servers and storage sites via desktops, laptops and handheld devices. According to Symantec CEO John Thompson, Altiris is growing two to three times faster than the company's core business.

At current levels, Symantec shares are 19% above the July lows. Even so, I believe the market is already pricing in poor fiscal 2007 results, given the discount to the company's historical average valuation and McAfee. Symantec is not a likely takeover target, but the new $1 billion buyback program should help support the stock. Considering that, I believe near-term downside is limited and that Symantec can trade back up through $20 over the coming quarters.

David Peltier is a research associate at TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Peltier appreciates your feedback; click here to send him an email.

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