Symantec To Cut Staff By Up To 8 Percent As Part Of $50M Restructuring
Symantec said it plans to take a series of cost reduction actions over the next nine months to address residual costs that remain after the platform security vendor's divestitures last year.
The Mountain View, Calif.-based company said that its board of directors has approved $50 million in restructuring expenses in connection with a plan to reduce Symantec's global headcount by up to approximately 8 percent. Symantec employs more than 11,000 people, according to the company's website, meaning as many as 880 employees could be affected by the cost-cutting efforts.
"We're still not extremely happy with the enterprise segment margins," Symantec CEO Greg Clark said during the company's earnings call Thursday. "This is just now refining some of the cost structure to really get to the right margin profile for the longer haul."
Symantec expects to have total operating margins in the mid-30 percent range for its 2020 fiscal year, which begins April 1 of next year, according to Nick Noviello, Symantec EVP and CFO. But in Symantec's most recent fiscal quarter, which ended June 29, the company had non-GAAP operating margins of just 28.1 percent.
The cost reductions are in large part meant to address stranded costs that remain after the $950 million sale of its website security and public key infrastructure (PKI) business to DigiCert in October 2017, Noviello said.
Most of the savings and expenses associated with restructuring are expected to be generated in Symantec's current fiscal year, which ends March 30, 2019. But Noviello cautioned that the timing of the cash can always depend on the set of severance actions taking place.
All told, Symantec's enterprise security business should be operating at a different margin profile than where it is currently, according to Clark. Part of that will happen from top-line growth, Clark said, and part will happen from cost efficiencies.
The $50 million restructuring budget approved by Symantec's board should help the company go after trapped expenses and improve on other pockets of the company going forward, according to Clark.
Sales in the fiscal first quarter ended June 29 tumbled to $1.16 billion, down 1.6 percent from $1.18 billion a year ago. On a non-GAAP basis, revenue sunk to $1.17 billion, down 5.1 percent from $1.23 billion last year. That edged out the expected $1.15 billion for the quarter, according to Seeking Alpha.
The company reported a net loss of $63 million, or 10 cents per diluted share, improved from a $133 million net loss, or 22 cents per diluted share, the year before. On a non-GAAP basis, net income inched forward to $231 million, or 34 cents per share, up 4.5 percent from $221 million, or $0.33 per diluted share, last year. That beat out Seeking Alpha's earnings estimate of 33 cents per share.
Symantec's stock plunged 8.33 percent to $19.14 in after-tours trading, marking the lowest trading price for the company's stock since June 2016. Earnings were announced after the market closed Thursday.
Enterprise security sales plummeted to $556 million, down 13.9 percent from $646 million the year prior due to longer than expected sales cycles for large, multi-product platform sales in North America. Consumer digital safety revenue, though, leapfrogged to $600 million, up 13.4 percent from $529 million last year.
For the coming quarter, Symantec expects non-GAAP earnings of 31 cents to 35 cents per diluted share on adjusted sales of $1.13 billion to $1.16 billion. That came in below Seeking Alpha's projection of non-GAAP earnings of 37 cents per share on adjusted sales of $1.19 billion.