Symantec CEO Says Cost-Cutting's On Schedule, Acquisitions Take A Back Seat To Capital Returns

Partners praised the methodical approach Symantec is taking to cost-cutting and acquisitions as the vendor updated the public on its progress Tuesday and unveiled the launch of the next phase of its planned $5.5 billion capital return program.

The Mountain View, Calif.-based company revealed a $1 billion accelerated share repurchase, with an expected additional $1.3 billion in share buybacks before March 2017 as it looks to reach its goal of $5.5 billion capital return to shareholders. The buyback will be funded using cash on hand and part of the proceeds from a $500 million strategic investment from Silver Lake in February.

Symantec also said it has hired advisory firm AlixPartners to help it with its cost-cutting efforts. The security vendor is looking to achieve cost savings of $400 million by the end of its fiscal 2018, primarily in its enterprise security business. CEO Michael Brown said in a statement that he believes Symantec is "well-positioned to continue this momentum of improving operating margins" and is on track to hit its cost-savings goals.

[Related: Q&A: Symantec CEO On Split, New Security-Focused Channel Vision And Apple Vs. FBI]

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A Symantec spokesperson said the company is not disclosing specific details about where costs will be cut in the enterprise security business, and so couldn't say how much the channel business will be affected, but that Symantec "continues to remain committed to our channel partners."

The moves are the first major changes since the company completed its split from Veritas at the end of January and heralded a $500 million strategic investment from Silver Lake.

Jason Eberhardt, vice president of strategic alliances at Chicago-based Conventus, said the moves show that Symantec is staying "laser-focused" on its strategic direction, and meeting its commitments to share repurchases, cost-cutting and acquisitions.

"Everything is so in line with their strategy," Eberhardt said. "They're not veering off course at all."

The capital return strategy is the immediate commitment for Symantec, Brown said. That strategy, combined with the company's cost-cutting initiatives in enterprise security, will take precedence over acquisitions the company plans to make in the months to come.

"Any acquisition opportunity we may pursue will not be at the expense of our capital return plans," Brown said. "In addition, any material acquisition opportunity will also have to meet the strict criteria of both accelerating our Unified Security strategy and creating a clear return for shareholders. The series of share buyback transactions announced today reinforces this commitment and demonstrates the board's confidence in Symantec's long-term prospects."

A Symantec spokesperson said there is still a "plan to make acquisitions that accelerate our unified security strategy." In a recent interview with CRN, Brown said those acquisitions will likely fall in the areas of threat protection, information protection and cybersecurity services. Brown said on the company's Q2 earnings call in November that the security vendor will be "very selective" with the acquisition targets it selects.

Partners said that while it would be great to see Symantec make an acquisition right away, it is more important that the security vendor take a "slow, methodical approach" to make sure the purchase is a strategic one.

"As a VAR, I'd love to have hot things to talk about and technology that people are excited about, but it doesn’t do me any favors if they buy something, overpay for it and we're back to where we started," said Wade Wyant, president and founder of Grand Rapids, Mich.-based ITS Partners.

"It's good to see they're being purposeful about what they're doing and [being] determined," he said.

Conventus' Eberhardt agreed, saying he's glad to see that Symantec isn't falling into the trap of the "shiny new toy" in security, calling the company's approach as a strategy for the "right way," not "right now."

"It makes them even more laser-focused that whatever they acquire really fits into the Unified Security posture," Eberhardt said. "They look at the security posturing and put the entire portfolio together with solutions that accent each other for a better security posture."