CUPERTINO, Calif. (
decision to sell its stake in a joint venture deal with Chinese tech giant
is a shrewd one, say analysts, predicting investor upside.
The security and storage specialist
its joint venture with Huawei in 2008, developing products for telecom companies and enterprises in Asia. Late on Monday, however, Symantec announced that it is selling its 49% stake for $530 million. Symantec spent just $150 million to acquire its stake in the JV.
Symantec is selling its Huawei joint venture stake.
In addition to the return on its investment, the joint venture has proved beneficial for Symantec in other areas. "We believe the partnership also helped improve the company's penetration in a number of markets (China, appliances,
the networking side of telcos) over the past few years," explained Daniel Ives, an analyst at FBR Capital Markets, in a note. "We loudly applaud this transaction as it clearly enhances shareholder value and speaks to management's focused vision."
The joint venture sale, he explained, should result in a one-time GAAP EPS benefit for Symantec's March quarter.
Despite some analyst concerns that Symantec could have got more money for its stake, the deal does include an ongoing software royalty payments for seven years, according to Ives.
"This announcement is an incremental positive from a stock perspective," added Todd Weller, an analyst at Stifel Nicolaus, citing recent improvements in Symantec's performance. "We continue to believe that Symantec has demonstrated improved and more consistent execution over the past several quarters."
In a statement released on Monday, Symantec said that its Chinese business has grown 46% over the last three fiscal years. Clearly, though, the company no longer needs the joint venture.
After a period spent wrestling with poor execution, Symantec started to
late last year, recently reporting
for its fiscal second quarter.
Symantec enjoyed strong growth across all geographies and business segments, according to James Beer, the company's CFO. Like the prior quarter, Symantec saw robust demand for its enterprise security, storage backup and consumer products, he told
The company's joint venture sale to Huawei comes at a time of
JV buyouts. In October, for example,
bought its mobile handset venture with
grabbed a jet engine making partnership with
Symantec's shares rose 6 cents, or 0.35%, to $17 on Tuesday.
--Written by James Rogers in New York
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