Apps & Software

The Death of Symantec (SYMC, MFE, CHKP)

Symantec Corporation (NASDAQ: SYMC) probably just managed to lose the patience of every last shareholder it has after posting poor earnings. Earnings were in-line with estimates, but revenues were flat and a bit light.  More importantly, it guided lower for the quarter ahead saying that orders are being pushed out in a cautious IT spending climate.  We have seen downgrades from what feels like every analyst out there.  This is acting as a drag on rival McAfee, Inc. (NYSE: MFE) and even on Check Point Software Technologies Ltd. (NASDAQ: CHKP).

Things have been stagnant for so long at Symantec that at the end of 2007 we called for then-CEO John Thompson to bring in a new CEO and just keep the Chairman title which he did.  Unfortunately, the Great Recession came and the benefits of new blood were not fully enjoyed by its shareholders.

The $0.35 adjusted EPS on $1.43 billion in revenues compared to estimates of $0.35 EPS and $1.47 billion from Thomson Reuters.  The guidance of $0.27 to $0.28 EPS on revenues of $1.44 to $1.46 billion compared to estimates of $0.34 EPS and $1.53 billion in revenues from Thomson Reuters.  About half its business is subject to currency fluctuations due to a strong international business.  Closing sales and execution are a larger issue than currency.

There has been a slew of analysts throwing in the towel today.  Bank of America/Merrill Lynch, FBR Capital, Morgan Keegan, Pacific Crest, and Raymond James are among those who cut their ratings on the stock.  Morgan Keegan was disgusted enough that its fair value was put at $12.00, and the new consensus target is likely going to be down around $15 or $16 from large firms that cover the stock.

McAfee, Inc. (NYSE: MFE) is viewed as the closest direct competitor of Symantec by Wall Street as far as groupings within the data security sector.  After today’s price drop, McAfee is almost half of the size by market cap and still one-third of the size in sales.  The news from the larger is hurting the smaller.  McAfee shares are down 2.6% at $30.30 and its 52-week range is $29.75 to $45.68.

Check Point Software Technologies Ltd. (NASDAQ: CHKP) is in a different boat as it is deemed solely as an enterprise player in network and gateway security solutions.  The onset of low-tide is dragging all ships out to sea.  It is weak with the market and the data security sector, but at $33.21 its 52-week range is $25.64 to $36.40.

Symantec has been a range-bound stock and that acquisition of Veritas marked the end of the multi-year run higher.  It has been the case for several years now that you wanted to be a buyer under $15.00 and a seller every time the stock went close-to or above $20.00.  Unfortunately, today’s action is well under $15.00 and the chart looks like a repeat of that death-spiral we saw during late-2008.  Shares almost violated $10.00 during that period of weakness.

The field here just went from those still with hope to a field full of despair.  The lows in January-2009 were $12.63 before the market recover took all stocks far higher from their lows.  With shares down 11.4% at $12.98 and the stock putting in a new 52-week low today with a new 52-week range of $12.90 to $19.16.  You know the take on 52-week trading ranges: companies that hit new 52-week lows are viewed as doomed to keep hitting new 52-week lows.

The stock will likely come back at some point.  The company just better hope a double-dip recession does not enter the equation beyond theory.  It now seems that it is going to take another raging bull market surge to help this dog and its owners any time in the immediate future.

Maybe the company can try to lure investors in on a “value investing” approach now, something that technology companies have had a hard time with when trying to find investors.  Maybe Symantec should consider changing its name to Semantic.

JON C. OGG