Symantec Blames Sales Model Changes For Second-Quarter Revenue Dip

Symantec is blaming the significant changes it is making to its sales coverage model for its poor second-quarter revenue performance.

The security vendor said the disruption caused by transitioning more than 90 percent of its direct sales force into information management or information security specialists disrupted new license sales direct to customers and through partners. The company reported lower than expected second-quarter revenue on Wednesday and said it anticipated third-quarter results would come in below expectations.

"I'm disappointed that our performance fell outside our revenue guidance range," said Symantec CEO Steve Bennett in the company's conference call Wednesday. "We underestimated the impact of the go-to-market changes we made, and it was a challenging quarter. However, we remain solidly convinced that these changes are required to position Symantec for long-term success."

Bennett said his company's sales staff would have stronger partner relationships and fewer highly concentrated sales hunters. "It's about giving them better solutions to sell and better channel relationships," Bennett said. Details about the changes to the company's partner program will be unveiled next month, Bennett said.

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Bennett said the company executed on its strategy to completely reorganize the company, turning its direct sales force from traditional generalists to specialists in the products they sell. He likened the changes going on at the company to changing the tires on a moving vehicle.

"We clearly lost more momentum than we expected in the transition and are working hard to address all the critical levers to accelerate progress in building a robust new business pipeline in Q3 and Q4 so we regain our positive momentum going into FY15," Bennett said.

As part of its Symantec 4.0 strategy announced in January, the company said it would remain committed to the channel as it reorganized its entire product portfolio. In addition to laying off up to 700 workers, the vendor said it would streamline the product portfolio to make it easier to sell integrated security and storage products. Executives created three product segments: User Productivity and Protection, Information Security and Information Management.

The company also lost senior executives as part of the overhaul. Thomas Gillman, a public sector channel executive, was a victim of Symantec layoffs in August. Symantec CFO James Beer stepped down earlier this month.

NEXT: Still Committed To The Channel

The company said it was committed to the channel, but the changes will have an impact on solution providers, say industry observers. Symantec is shifting the way it works with channel partners, said Matthew Casey, an analyst at Hampton, N.H.-based Technology Business Research. The company will be more selective in working with partners that can deliver better integrated products in its portfolio to the end client, Casey said.

"They're going to segment their channel program a lot more and interact and engage with the correct channel partner for the specific opportunity," Casey told CRN. "They need to be able to piece together seamlessly because that is what the market demand is requiring."

Casey said McAfee, Trend Micro, Kaspersky Lab and other security vendors are making gains while Symantec retools its go-to-market strategy. Symantec doesn't sell network security gear, but the firm said it would align itself with partners to address customer needs.

"They recognized it as a gap in terms of capabilities," Casey said. "The biggest opportunity for Symantec in the next year requires that they attach their solutions to some of the bleeding-edge vendors."

Symantec said second-quarter revenue fell 3.5 percent to $1.64 billion. It reported on Wednesday that every part of its product portfolio was down in its second quarter. Symantec's user productivity segment, which makes up the company's endpoint security and management business as well as its encryption and mobile security offerings, represented 44 percent of its total revenue but declined 3 percent year-over-year, Symantec said.

The company's information security segment made up of its mail and web security, data loss prevention, authentication services, data center security, hosted security services and managed security services declined 2 percent year-over-year, the company said. It represented 19 percent of total revenue in the second quarter.

Meanwhile, the information management segment, made up of its backup and recovery software, information intelligence, archiving and e-discovery, and information availability business, declined 5 percent year-over-year, according to the company. The segment represented 37 percent of total revenue in the second quarter.

The company had success in international sales, seeing gains in Europe, Middle East and Africa as well as the Asia Pacific and Japan in the second quarter. Symantec said it ended the quarter with cash, cash equivalents and short-term investments of $3.8 billion compared to $4.0 billion, a decrease of 4 percent year-over-year.