Symantec Beats Earnings Estimates

The company guides lower for the fourth quarter.
Publish date:

Updated from 5:32 p.m. EDT


(SYMC) - Get Report

fourth-quarter earnings beat Street estimates on profit flat with a year ago, but the security-software company issued lower guidance than analysts had anticipated for the June quarter.

Net income for the quarter totaled $118.8 million, or 11 cents a share, down from $119.7 million, or 16 cents a share, in the year-ago quarter.

Excluding certain items, Symantec earned $279 million, or 26 cents a share, in the fourth quarter, down from $314 million, or 26 cents a share, in the parallel quarter. Analysts expected 25 cents a share.

Symantec reported $1.24 billion in revenue for the quarter, rising from $712.7 million for the fourth quarter of 2005. When including $61 million in deferred revenue as part of purchase accounting associated with the Veritas acquisition, revenue was $1.30 billion, compared to $1.29 billion a year ago. On that basis, the company edged past the Thomson First Call consensus of $1.27 billion.

First Call estimates do not reflect the adoption of FAS123. FAS will be reflected in the June numbers, the company said.

After hours, shares of Symantec were recently up 53 cents, or 3.1%, to $17.62.

On a conference call with analysts after the bell, Symantec CEO John Thompson acknowledged that the "the last 10 months have not been the easiest in our history."

The security company faced higher-than-anticipated employee attrition after the


merger last July, but now, Thompson said that the company feels like "one team."

"We're poised for a better, much stronger fiscal year 2007," he said.

Symantec CFO James Beer, three months into his position, said that "one of my first tasks was to re-look through the planning that had been done this fiscal year."

Beer also noted that the number of high-profile viruses has declined sharply in the last year or so and the antivirus market is maturing. Also, the

type of attacks facing customers is changing.

"We feel as through we've got a robust pipeline of new product development," Beer said, referring to the company's efforts to combat identity theft, spyware and key logging, and detect phishing attacks --"that sort of nefarious activity."

Adam Holt, senior analyst with JP Morgan, said that the company showed "surprisingly strong consumer and enterprise bookings for the quarter. Deferred revenue was better than expected as well."

For the first, or June, quarter, Symantec said its revenue would range between $1.2 billion and $1.23 billion. Non-GAAP revenue will be between $1.22 billion and $1.25 billion. That's within the range of First Call revenue estimates of $1.25 billion.

The company expects to earn between 5 cents and 7 cents, and excluding items, EPS should total 20 cents to 21 cents. That falls short of the analyst average of 23 cents a share.

For the full-year 2007, Symantec forecast sales between $5.2 billion and $5.4 billion. GAAP EPS will be 46 cents to 47 cents. Non-GAAP revenue is expected to be $5.3 billion to $5.5 billion, including $55 million in deferred revenue from the Veritas deal. Non-GAAP EPS will range from $1.05 to $1.15.

When including both revenue and expenses, and the general business environment, Beer reduced revenue guidance for the full year by roughly $100 million.

He said that the change is "within proportion" of a $5 billion company.

"One of the things that seems as though the analyst community has not fully taken into account is the June result where we tend to have a seasonal decline in volume," Beer said.

Consensus for the full year is revenue of $5.43 billion, with a full-year EPS of $1.11.

"Performance in all segments and regions was quite strong during the quarter, driven by solid demand for our email archiving, storage, and compliance solutions as well as Norton Internet Security," Thompson said in a statement.

"Our enterprise and consumer antivirus segments performed well in a stable pricing environment," he added.

Holt said the lower guidance for fiscal 2007 was largely expected, he added. Holt has an overweight rating on the stock. JP Morgan has an investment banking relationship with the company.