Symantec Trying To Change Its Stripes (SYMC)
There was one small bit of good news last night out of Symatec (NASDAQ: SYMC). The data security and storage leader announced that it was actually selling a unit. San Francisco-based private equity firm Vector Capital is acquiring its Application Performance Management unit and this will operate as a new company under the name Precise Software Solutions Inc., and the deal is expected to close this current quarter.
Greg Butterfield, interim group president of Storage and Server Management Group at Symantec: “Selling the APM business will allow the Storage and Server management team to focus on securing and managing information.”
It is no secret that Wall Street wasn’t impressed with the Veritas acquisition that killed the stock. We even noted that Chairman & CEO John Thompson may be up against the ropes in 2008 and may have to relinquish his CEO title for some new inertia there at Symantec. It is too bad because we actually like this CEO and even liked the strategy, and there is nothing wrong with Thompson’s qualifications or street credibility.
The strategy just isn’t working and the culture needs a shakeup. Wall Street is a “show me” demanding beast that must be fed. The company suffers from low growth, no real cost cutting initiatives, buybacks that failed to bolster share prices, and more.
But this may be an interesting ploy from Symantec. We dug around to see what this would result in since terms weren’t spelled out. Precise Software was acquired in 2003 and it looks like it became a non-core operation faster than it was bought after an integration between Symantec and Veritas. This looks like it will trim approximately 300 employees out of Symantec and because this is non-core may incrementally add to margins this year.
This may attract attention after the stock has been battered and after numerous traders have constantly discussed a somewhat bloated structure that needs a shakeup. Without knowing the brains behind the machines there, it is hard to know if this will mean that more sub-units are up for review. But that is what some on Wall Street will be hoping for.
Thompson has also made some recent additions to his immediate staff. Earlier this month the company also promoted Enrique T. Salem as its new chief operating officer who will be responsible for product development, sales, services, marketing and Information Technology (IT) activities. Salem came to Symantec from a 2004 acquisition of Brightmail, where he was president & CEO. Gregory W. Hughes, who had been group president of Symantec Global Services, was named chief strategy officer. Hughes is now responsible for corporate development and strategy and will focus on new business incubation, such as the Symantec Protection Network, the company’s software-as-a-service (SaaS) platform, and other areas of internal investment.
We don’t like having to call CEO’s out on the street, particularly when we like them. These efforts are probably hard to ignore and it is looking like Thompson is now making some positive moves in the right direction. The stock market and its stock chart may be the stock’s biggest problem now, but that is no fault of management and bad times never last forever.
Symantec shares were up almost 2% to $15.55 in thin volume pre-market trading The 52-week trading range is $15.15 to $21.32, and it had reached $30.00 before the Veritas giant acquisition. It looks like at the last minute before the market open there were sell orders so we’ll have to look around to see if the stock took a downgrade.
Jon C. Ogg
January 18, 2008