Why Symantec's Accounting Probe End Should Remove Major Shareholder Overhang
Symantec Corp. (NASDAQ: SYMC) may have dodged a big bullet in its turnaround efforts. The company announced that it has ended its internal accounting probe and that there will be no major revisions to its financial results.
What Symantec did find in the review was that a $13 million transaction will mostly be transferred into the deferred category. This may sound bad on the surface, but Symantec’s most recent fiscal year (March 30, 2018) showed revenues of more than $4.84 billion.
As a reminder, Symantec has been under fire from the activist firm Starboard Value. The company also recently has complied with some of their efforts, and we first opined how the activist investors would likely win here.
Another issue that may be a win for the company is that Symantec also noted that no employment actions with respect to any Section 16 officer have been recommended as a result of the investigation. And regarding the $13 million transaction, Symantec said:
The Audit Committee reviewed a transaction with a customer for which $13 million was recognized as revenue in the fourth quarter of fiscal year 2018 (which is still an open period). After subsequent review of the transaction, the company has concluded that $12 million of the $13 million should be deferred. Accordingly, the previously announced financial results for the fourth quarter of fiscal year 2018 and the first quarter of fiscal year 2019 (ended June 29, 2018) will be revised to take into account this deferral and any other financial adjustments required as a result of this revision.
Symantec also went on to note certain allegations that were previously brought up:
The Audit Committee also reviewed certain allegations concerning, and identified certain behavior inconsistent with, the Company’s Code of Conduct and related policies. The Audit Committee referred these matters to the Company for, and the Company intends to take, appropriate action.
The Audit Committee proposed certain recommendations which the Board of Directors has adopted, including: appointing a separate Chief Accounting Officer; appointing a separate Chief Compliance Officer reporting to the Audit Committee; clarifying and enhancing the Code of Conduct and related policies; and adopting certain enhanced controls and policies related to the matters investigated.
One issue that Symantec brought up is that, while it cannot predict an exact date to catch up on its filings, the company is targeting October 27, 2018, as the date that it will make its 10-K (annual report) filing. Symantec has not filed its 10-K that was previously due and has not filed its 10-Q (quarterly report) for the first quarter of 2019. The company did warn that control deficiencies or weaknesses could be identified as part of this process.
The market has responded with a positive reaction, sending Symantec shares up 4% to $21.60 early Monday. Its 52-week trading range is $17.81 to $33.92.