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Symantec's definition of transformation: Take the profit made a year ago and burn a quarter of it
Silver Lake slips its PIPE into troubled security firm
Symantec has announced its results for the third quarter of fiscal 2016 and they aren't looking pretty. Revenues are down 6 per cent and profits plummeted by 23 per cent.
In a conference call following the earnings announcement, CEO Michael Brown said the Silicon Valley firm was well on its way with a three-year restructuring plan that is focusing on improving margins, prioritizing R&D spending in high-growth areas, and stripping down the company to its core security business.
"We are entering the second half of our transformation with a stronger foundation, evidenced by new products that are gaining mindshare among customers, better top-line performance, and a clear path to long-term profitability," Brown said.
"I'm pleased with the progress we've made against our priorities, including strengthening our security portfolio, enhancing our go-to-market capabilities, improving our cost structure and efficiently allocating capital."
- Symantec's net revenue for the quarter was $909m, down 6 per cent on the same quarter last year when the company brought in $970m.
- Net income was $170m, down 23 per cent from the $222m earned in the third quarter of 2015.
- GAAP earnings per share for the quarter will be $0.25, compared to $0.32 last year.
You may think that the markets might react badly to the results, but the stock price is up seven per cent in after-hours trading. This is because Symantec announced a new infusion of cash which it will be giving straight back to shareholders over the coming year.
The money is coming from Silver Lake, the private equity group that has a big stake in Dell. The firm is paying Symantec $500m for a stake in the security company in what's called a PIPE – a private investment in public equity – and Silver Lake managing partner Ken Hao will be joining the board of Symantec to keep an eye on his investment.
"As a premier cybersecurity provider, Symantec has the potential to solve some of the most significant challenges facing the rapidly growing market for security solutions," said Hao. "We look forward to partnering with Symantec to achieve its long-term strategic vision."
Symantec will spaff the money out to shareholders, along with some of its own reserves and the money from the botched Veritas sale, to keep investors happy. CFO Thomas Seifert said this would total $5.5bn by the end of March 2017.
"This total includes the $500 million accelerated share repurchase we have already completed, as well as a special dividend, equaling $2.7 billion, and $2.3 billion in share repurchases," he said. "Additionally, we will be implementing plans to achieve greater profitability through cost savings of approximately $400 million by the end of fiscal year 2018." ®