Symantec reports solid Q3 earnings, huge writedown

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The fierce economic storm Symantec has been weathering with steady growth doesn't look like it's going to let up in the March quarter, company executives say.

The fierce economic storm Symantec has been weathering with steady growth doesn't look like it's going to let up in the March quarter, company executives say.

Symantec reported hearty earnings this week for its third fiscal quarter, but weak revenue and a hefty loss due to writedowns indicate the company could be facing challenging times ahead.

Symantec's revenue for the third fiscal quarter ended Jan. 2 fell to US$1.51 billion from US$1.52 billion in the third quarter of last year. Net income for the quarter was US$350 million, up 20 percent compared with US$292 million for the same quarter last year. Much of the earnings came from strong sales in consumer, managed services and storage solutions, the company said.

The company also reported a loss of US$6.8 billion for the quarter, due to a writedown of the value of goodwill on its books. Symantec did not outline specific details of the writedown. However, in recent years the company has acquired several companies, the business value of which may have declined from their original prices. Nevertheless, the company beat analysts' expectations.

While Symantec reported better-than-expected financial earnings for the quarter, the company experienced a steady decline in its security sector and incremental growth in other divisions. And Symantec executives anticipate that financial conditions will remain challenging into the next quarter.

"Looking forward to our March quarter, the final quarter of our fiscal year, we expect the market environment to remain challenging," said Symantec CEO John Thompson. "In an environment where revenue growth may be the greatest uncertainty, our goal is to grow earnings and to emerge from this economic downturn a stronger company positioning for even greater success during the next economic growth cycle."

Symantec reported a drop in security and compliance revenues in the third fiscal quarter of 2009, which fell to US$3.96 million from US$4.19 million from the same quarter last year, or 5 percent.

Executives said that where Symantec fell short was in its Symantec Endpoint Protection products for the SMB space.

"There's more work to be done in the SMB space, and that is a place where we need to see some overall improvement," said Enrique Salem, Symantec COO. "We can definitely do better."

However, Salem said that security offerings, such as its data loss preventions products, have done well in enterprise sectors as corporate customers adopted solutions to protect valuable data and assets while adhering to compliance regulations such as PCI DSS.

During the quarter, the company signed deals with Continental Airlines to protect its customers' credit-card numbers, personally identifiable information and other sensitive data, executives said.

Symantec executives also cited the company's enterprise managed services, storage and DLP offerings as some of the company's strongest growth areas.

Symantec's storage and server-management sectors, which represent 37 percent of the company's total business, have fluctuated slightly, experiencing 1 percent growth from third-quarter 2008, but falling 1 percent from the second-quarter 2009. In particular, company executives said that its data centerbackup and deduplication products, as well as its continuous data protection products, are particularly strong in enterprise segments.

"In this economic climate, customers are looking for solutions that can deliver cost savings within an operating budget cycle," Salem said. "As such, we initiated a new selling campaign built around the theme for 'Stop buying Storage.' Customers using our solutions can reduce storage costs by better utilizing existing storage and by buying lower-cost storage."

Meanwhile, revenue generated from services continued its upward growth, thanks, in part, to continued updated maintenance renewals and purchasing new maintenance agreements, execs say. The company's services segment experienced 20 percent growth from the third quarter of 2008, increasing from US$104 million to US$125 million.

Symantec's consumer division has also held steady, increasing 2 percent from the third quarter in 2008, which is largely attributed to a spate of Norton consumer security products. In 2009, executives anticipate targeting emerging markets and new consumer segments with PC Tools products, a more affordable array of security endpoint products. In addition, executives anticipate the upcoming release of the 2009 Norton 360 All-In-One security suite, as well as Norton Online Backup in February.

And the company is currently shipping Norton Internet Security for the Mac, as Apple continues to gain market share with its laptops and desktop computers. "Even Mac owners are susceptible to online threats, and when it comes to phishing, it doesn't matter what platform you're using," Salem said.

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