Symantec Reports Flat Quarter On Continued Storage Weakness

Symantec on Wednesday reported flat revenue but strong earnings growth in during its first fiscal quarter of 2011, as weakness in its storage business acted as a drag on strong security sales.

In Symantec's fiscal first quarter ended July 2, the company reported revenue of $1.433 billion, which was essentially unchanged from the $1.432 billion it reported in last year's Q1.

Symantec reported net income of $161 million, or 20 cents per share, for the first quarter of 2011 compared with income of $74 million, or 9 cents per share, for the same quarter last year.

The company's license revenue of $185 million in the first quarter of 2011 was down 17 percent from the $223 million it reported last year, while content, subscription, and maintenance revenue rose 3 percent to $1.25 billion.

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Symantec's consumer revenue rose 6 percent over last year to $473 million, and its security and compliance revenue rose 1 percent to $340 million. Its services revenue remained unchanged with last year at $96 million.

Revenue for Symantec's largest business segment, storage and server management, fell 5 percent year-over-year to $524 million. Allan Krans, senior analyst with Technology Business Research, said in a research report that this is the sixth quarter in a row where Symantec's storage revenue has fallen on a quarter-to-quarter basis.

"Symantec’s Storage and Server Management business continues to reel from the recession, extending the streak of consecutive quarters with a year-to-year decline to six, with [second quarter of calendar 2010] revenue in the segment representing a 21.2% decline compared with 2Q08," Krans wrote in the report.

The fall in storage management revenue comes as a result of a number of large enterprise deal which slipped from the first quarter to the second quarter, said Enrique Salem, president and CEO of Symantec.

However, Salem said those deals were not lost to competitors. Instead, he said, customers have slowed down their purchasing decisions.

Next: Some Parts Of Storage Business Doing Well

Symantec's backup and archiving business is doing well, with sales of the company's Backup Express increasing by double digits over last year, Salem said. A new version, Backup Express 10, was released in January.

The company's new enterprise-class NetBackup 7 data protection application, also introduced in January, is either in production or evaluation in 25 percent of Symantec's enterprise customer base, Salem said. "We expect this release to benefit us in the second half of the year," he said.

Symantec expects to release a new version of its Enterprise Vault email and content archiving solution this quarter which includes support for Exchange 2010 and SharePoint 2010, de-duplication capabilities, and other features, he said.

Overall, Symantec is seeing broad adoption of its new storage technologies, Salem said. "So we are optimistic about what we are seeing there," he said.

Symantec customers are also starting to depend less on larger systems and move more to clustered systems and to increased virtualization on the VMware platform, Salem said.

On the security side, sales of Norton 360 rose 30 percent year-over-year. Symantec's security business is doing well in both the enterprise and midsize business market, with sales of its data loss prevention solutions growing by double digits over last year, Salem said.

Symantec is seeing good growth in its SMB business thanks to its solution providers, Salem said. The company has recently expanded its small business specialization channel program, as well as its services provider program to help partners increase monthly recurring revenue, he said.

At the same time, the customer base for the company's hosted services business grew by 50 percent over last year, Salem said. That is leading to increased subscription-based revenue and a drop in traditional licensing and maintenance business, he said.

Looking forward, Symantec expects second fiscal quarter revenue of $1.445 billion to $1.465 billion, or down between 1 percent and 2 percent compared to the $1.47 billion it reported last year.

The company also expects to report earnings of between 9 cents and 10 cents per share, down from 19 cents per share last year.