Symantec Profit Falls, Revenue Rises Slightly

Symantec's profit fell 12 percent for its 2010 second quarter, in part attributed to higher-than-expected sales costs related to its acquisitions of PGP, GuardianEdge and the VeriSign security business. Revenue rose 2 percent due to strong sales in backup, archiving and data loss prevention segments.

The Mountain View, Calif.-based security giant's net income fell to $136 million from $155 million, while the company's revenue rose to $1.48 billion from $1.47 billion from its second quarter in 2009, beating out the company's top end guidance from the previous quarter.

"Excluding the purchase-accounting-related deferred revenue write-downs of $49 million from our three recent acquisitions, EPS would have increased by 4 cents to 38 cents compared to 36 cents in the September 2009 quarter," said James Beer, Symantec CFO, during a conference call Wednesday.

The company also cited a drop in its consumer operating margin, driven by a onetime $10 million charge resulting from delayed subscription renewals.

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Executives attributed the incremental revenue growth to strong sales in its backup and archiving business, as well as data loss prevention and its burgeoning hosted services.

NEXT: Integration Of Acquisitions Key

"The team's solid execution during the September quarter resulted in better-than-expected results," said Symantec CEO Enrique Salem during a conference call Wednesday. "Our performance was driven by strength in backup and archiving and continued growth in hosted services and data loss prevention. We closed a majority of the enterprise deals that had slipped last quarter and finished the September quarter on a strong note."

In particular, the company's overall revenue growth was bolstered by double-digit growth rates of Backup Exec for backup and Enterprise Vault, Salem said. In addition, Symantec's Hosted Services business also posted double-digit growth, spurred by the rapid adoption rates of the company's SaaS-based security solutions.

Executives also lauded the better-than-expected performance of PGP, GuardianEdge and the VeriSign security business, aided by the technologies' smooth integration into the Symantec product line as well as efficient go-to-market strategies.

"The PGP and GuardianEdge acquisitions exceeded our expectations in the September quarter. The team has done an outstanding job of integrating sales and operations," Salem said. "On August 9, we closed the acquisition of the VeriSign security business, and our results exceeded our expectations. The SSL certificate install base grew 16 percent year-over-year as we realized growth in both the premium and low-end segments."

Salem also pointed to double-digit growth in the company's public sector business, driven by strong sales in several of the company's key product lines in both civilian and defense sectors.

NEXT: Symantec Anticipates Mobile Security Push

"Our commitment to government standards across the portfolio, along with products such as DLP and Enterprise Vault, helped drive our performance," he said.

Looking forward, executives predicted revenue to be between $1.57 billion and $1.59 billion, up slightly from $1.55 billion during the third quarter in 2009 and rising 2 percent to 3 percent year-over-year. The company anticipates $18 million in revenue from the acquisitions of PGP and GuardianEdge and $38 million in revenue from the VeriSign security business to boost third-quarter sales revenue totals.

On the call, Salem alluded to future growth areas for the company, which may entail further investment in the mobile security space.

"What we've fundamentally believed is that we have to be able to deliver capabilities across a range of these new devices, whether it be Android, BlackBerry, Apple, and we see that as an opportunity," he said. "These new smart devices, our expectation is that next year, there's going be more smart devices connecting to the Internet and PCs. And that's why our team is focused on a number of these new initiatives across, not only the consumer business, but also in the enterprise market, where our teams are delivering new capabilities to do a better job of helping enterprises and secure the devices but also manage the devices."