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Symantec Needs a Spark

The company hopes new products, senior management changes will lift the stock.

IT security company


(SYMC) - Get Report

needs some investor love.

In the past six months, the company has put some of its biggest challenges behind it, including the integration of the $10.25 billion purchase of storage company Veritas, the introduction of new products to revitalize its portfolio and changes in its senior management.

Still, Symantec's stock continues to lag rivals and analysts remain skeptical about its results. The bar has been set pretty low for its second-quarter earnings report on Wednesday.

Analysts will be looking for continued strength in its core consumer products business as well as signs of continued growth in the data center management and enterprise security divisions.

If Symantec beats guidance, some investors could flock to it, said Adam Holt, an analyst with J.P. Morgan.

For the second quarter of fiscal 2008, analysts polled by Thomson Financial expect revenue to rise at least 9.4% to $1.39 billion from $1.27 billion in the same quarter fiscal 2007. Earnings per share are expected to remain flat at 26 cents.

"With expectations low for the next several quarters and Symantec benefiting from several key product releases and potentially better execution, the numbers are likely to hold a positive bias over the next two quarters which should fuel the stock," says Holt in his report. J.P. Morgan has an investment banking relationship with Symantec and makes a market in the company's shares.

For the third quarter, analysts expect $1.47 billion in revenue, up from $1.32 billion a year ago and 31 cents in earnings per share, up from 26 cents a share from the year-ago quarter.

So far, Symantec shares have underperformed its competitors. The stock has been up 4.5% in the three months since July 23 but down 1.4% for the year. It closed at $20.96 on Tuesday, up 60 cents, or 2.9%. Meanwhile, rival

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shares have grown 11.4% in the same three months and are up 45% for the year. McAfee reports results on Thursday.

The Cupertino, Calif.-based Symantec's consumer products division has been the company's most consistent and strongest performer.

Symantec has been tweaking its consumer products to offer users the latest tools to fight security threats. In August, the company refreshed its line of consumer products when it began offering Norton Internet Security 2008 and Norton AntiVirus 2008.

Second-quarter growth in the consumer business division could indicate whether Symantec is making the right bets in its consumer strategy and if users still remain sold on its products.

On the enterprise side of its business, Symantec hopes to regain momentum in the data center management division, where it has faced sluggish growth.

With the integration of the Veritas acquisition complete, Symantec has launched NetBackup 6.5, a product that will bring together different backup technologies such as tape, virtual tape libraries, disk backup and data deduplication into a single platform.

If customer feedback on NetBackup is positive, the data center management business could post revenue of $388 million, or a 4% year-on-year growth, estimates Heather Bellini, an analyst with UBS, which has an investment banking relationship with Symantec.

Since the first quarter of fiscal 2008, Symantec also started reporting results for a new segment resulting from its

$830 million acquisition of systems management company Altiris in January.

Though analysts have welcomed the Altiris acquisition, they said second-quarter results will show how much Symantec is gaining from the purchase.