The antivirus market and threat landscape continue to undergo important changes, new CFO James Beer said during a conference call with analysts, as Symantec reported its fourth fiscal quarter numbers.
Symantec guided down, saying it expects fiscal 2007 revenue of $5.3bn to $5.5bn, and earnings of $1.05 to $1.15 per share. Both were in line with analyst expectations, but a little lower than the company has previously guided.
Beer and chief executive John Thompson said they had made the downward adjustment, which is not a massive deal considering the size of Symantec’s business, based on the slower antivirus market and imminent competition from Microsoft, which releases its OneCare software this summer.
In 2004, almost 100 medium-to-high severity viruses hit the marketplace, Thompson said. In calendar 2005 there were only six. Clearly, for the under-penetrated low end of the business or corporate market, and the consumer market, having a lot of visibility of viruses and virus attacks certainly drives a level of demand.
When the threat landscape changes so precipitously, where there are so few high profile attacks, there will be a corresponding effect on basic antivirus and other technologies that tend to deal with malicious content, he said. That’s why we think we should shift our focus to threats that are more silent, more focused on identity theft and fraud.
He pointed to the late summer beta release of Symantec’s next major desktop product, currently codenamed Genesis, that will tackle phishing and other types of fraud using technology Symantec acquired when it bought WholeSecurity late last year.
The problem of relatively weak demand at the low end of the consumer market will be compounded by Microsoft’s entry into the space. Thompson has said in the past that he expected Microsoft to sell best in this under-penetrated segment of the consumer space.
He has now added that Symantec will heavily market is consumer portfolio, which is currently led by Norton Internet Security 2006, to push past the Microsoft threat.
One of the things we’re doing ahead of Microsoft’s entry into the marketplace is to make sure the market understands the strength of our product portfolio, the strength of our brand, so we are investing more in the consumer business in raising the awareness and consciousness consumers have of us, Thompson said.
Microsoft OneCare will be sold more cheaply than Norton. Thompson noted that the just-closed quarter saw stable security pricing in enterprise and small businesses compared to other recent quarters, but warned that one quarter does not make a trend.
I would hope that most of the companies that compete in this space realize that its not in our collective best interest to compete on price, he said, apparently candidly.
Numbers for the company’s fourth fiscal quarter were a mixed bag. If you were looking for the company to beat Wall Street earnings estimates, you got it. If you were looking for profit to actually rise, you didn’t.
The company reported net income for the three months ended March 31 of $119m, about a million bucks shy of its performance a year ago. Earnings per share after items of $0.26 beat estimates by a penny. Revenue was up 74% at $1.24bn.
For the full fiscal year 2006, Symantec’s net income was down to $157m, from $536m in fiscal 2005, on revenue that was up 60% to $4.14bn.
The consumer security space is still the largest revenue segment of Symantec’s five reporting segments. In the quarter, it accounted for 28% of revenue but was flat year-over-year due to a new ratable accounting method. Without that adjustment, the segment would have been up 5%, Thompson said.
The enterprise security business was up a more healthy 9%, representing 22% of total revenue.
For comparison, a year ago the March quarter saw consumer security revenue up 22% and enterprise security up 23% compared to the equivalent quarter in Symantec’s fiscal 2004.
Storage management and data protection software, both businesses acquired when Symantec bought Veritas Software last year, grew 2% and declined 8% respectively. Both represented 23% of revenue. Thompson identified Enterprise Vault, Storage Foundation and compliance products as the quarter’s strongest sellers.
Services revenue represented 4% of total revenue and grew 16% year-over-year.
The last ten months have not been the easiest in our history, Thompson said, referring to the elapsed period since the Veritas deal closed. The company saw staff attrition, and a share price slump.
But he said the Symantec and Veritas sales teams have now been fully integrated, and pointed to opportunities to intergrate not only Veritas’ products, but also those of other companies Symantec has recently acquired.
In messaging, for example, the idea is to tie together email security and archiving, and to extend it to other types of messaging, to create a full messaging management suite, Thompson said.
And the acquisitions of BindView, Sygate and WholeSecurity will see Symantec integrate its new client-based and clientless policy compliance software to have policy compliance a common theme of its software catalog.
