Symantec Slashes Guidance, Investors Slash Stock Price

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Symantec Inc. (NASDAQ: SYMC) reported second fiscal quarter 2014 results after markets closed on Wednesday. For the quarter, the network security software maker posted adjusted diluted earnings per share (EPS) of $0.50 on revenues of $1.64 billion. In the same period a year ago, the company reported EPS of $0.45 on revenues of $1.7 billion. Second-quarter results compare to the Thomson Reuters consensus estimates for EPS of $0.44 and $1.69 billion in revenues.

On a GAAP basis Symantec posted EPS of $0.34, up 26% year-over-year.

Due to the second quarter’s revenue shortfall, the company lowered its full-year guidance. The company now expects annual revenue to decline by 3% to 4% year-over-year, non-GAAP operating margin to increase by 30 to 60 basis points, and adjusted EPS to be lower by 1% to 1.5% compared with the previous fiscal year. The consensus full-year estimates had called for EPS of $1.90 on revenues of $6.94 billion.

A back-of-the-envelope calculation based on Symantec’s guidance puts EPS in at around $1.74 to $1.75 based of fiscal 2013 EPS of $1.77. Last fiscal year’s revenues totaled $6.91 billion and based on Symantec’s new guidance current fiscal year revenues would fall to a range of $6.63 to $6.7 billion compared with a current consensus estimate of $6.94 billion in revenues.

For the third quarter, Symantec guides revenue to $1.63 to $1.67 billion, well short of the consensus view for $1.79 billion in revenues, which would have been flat with the same period a year ago. The company also guided adjusted EPS to a range of $0.41 to $0.43, down from last year’s EPS of $0.45 and the consensus estimate for this year of $0.51.

Symantec said in July that it had reduced its management structure by 30% to 40%. The company has never clearly said how many employees will lose their jobs in its restructuring, but reports surfaced in June that about 1,700 of the company’s 21,500 employees would be fired.

The company’s CEO said:

We’ve reallocated resources to develop new integrated offerings, split the sales organization into renewals and new business teams, and simplified our management structure. While this was a challenging quarter in our transition year, we expect our actions to translate into growth. We remain committed to our FY15-FY17 targets and are confident that we are on the right track.

Symantec’s shares are trading down about 12.7% at $21.50 in after-hours trading Wednesday, in a 52-week range of $17.35 to $27.10. Thomson Reuters had a consensus analyst price target of around $27.90 before today’s report.

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