Symantec Beats The Street Thanks To Security Threats

Symantec has beaten Wall Street expectations for its fiscal first quarter thanks to the strong  performance of its security and data storage divisions.

Symantec reported net income of $172 million (£105m), or 22 cents (£0.13) a share, for the fiscal first quarter ended 30 June. Non-GAAP earnings were 40 cents (£0.24) a share, exceeding analyst predictions of earnings at 37 cents (£0.22) a share.

Symantec saw revenues of $1.65 billion (£1bn) for quarter, a 15 percent growth from the same period a year ago.

Good Execution

All divisions “executed very well,” and “performance was driven by strength in backup, data loss prevention, managed security services and consumer,” Enrique Salem, CEO of Symantec, said on the earnings call with analysts.

Enterprise storage and server management contributed 36 percent of total revenue in the quarter, up 7 percent over the year-ago period, and Salem is confident the gains will continue. Symantec generated 281 transactions valued at more than $300,000 (£183,000), and 74 percent included multiple products, James Beer, Symantec’s CFO, said on the earnings call. The company closed 57 deals valued at more than $1 million (£610,000).

Storage and availability management grew 3 percent as Symantec expanded its platform from Sun Solaris and other Unix platforms to Linux and Windows environments. Salem specifically highlighted Symantec’s successful Red Hat partnership as “we help organisations migrate to Linux.”

Symantec also realised $3 million (£1.8m) in revenue from the Clearwell acquisition, which closed earlier than expected on 24 June, Beer said.

The consumer business unit remained unaffected by the industry-wide weakness in consumer demand for personal computers, Salem said.

“The current threat environment is driving increased awareness for information security,” Salem said. Symantec’s Norton security products go beyond the PC to protect users through a variety of cloud and mobile offerings, he said.

Symantec introduced two new mobile security applications, Norton Mobile Security for Android 2.0 and an app for Norton Online Family, during the quarter, but Salem said it is still too early to see how that market will develop.

Toxic Threats

Symantec expects to see strong demand for security and continued growth in storage from enterprises. The “toxic” threat landscape combined with the phenomenal growth of data is leading customers to say, “How do I protect all this data that’s being created?” Salem said.

“The combination of those two trends are absolutely helping Symantec,” Salem said.

While competitors may be expanding endpoint protections, Symantec will focus on the information, such as identifying users and determining whether they have access to the data, Salem said in response to an analyst question. “The device to us is irrelevant,” he said, while adding that since customers are still looking at data loss prevention and managed security services to secure their data, Symantec will continue offering those products.

The heightened threat landscape also benefited Symantec’s VeriSign Security business as both the premium and value SSL (Secure Sockets Layer) offerings gained market share, according to Salem. In the user authentication business, which includes soft tokens and Public Key Infrastructure used to verify user and device identity, Symantec has issued more than 250 million certificates, Salem said, calling it “an important milestone.”

“Our user authentication business has benefited from increased interest in our solutions as a result of the more the toxic and targeted threat landscape,” Salem said.

Symantec bought VeriSign last year for $1.3 billion (£793m).

Symantec’s sales of new licenses grew for the second consecutive quarter, driven by data loss prevention, archiving and backup, Beer said on the earnings call. The 4 percent increase in license revenue indicates strength in potential future business from maintenance and product upgrades, he said.