Hurt by server slump, Symantec sees market stabilizing

With revenue down slightly during its latest fiscal quarter, Symantec said Wednesday that it was starting to see some stabilization in enterprise spending.

Symantec reported revenue of US$1.48 billion for its second fiscal quarter, which ended Oct. 2. That was ahead of the consensus analyst estimate recorded by Thomson Reuters, but down 3 percent from the same quarter a year ago. Excluding charges, Symantec's earnings were also ahead of expectations at $294 million, or $0.36 per share, the company said.

Symantec's consumer business did well, and while its storage and server management division saw sales drop 9 percent year-over year, IT spending is strengthening, said Symantec CEO Enrique Salem in an interview Wednesday.

"We're definitely seeing the U.S. market stabilize," he said. "We've seen China and parts of Asia continue to do well, and we're seeing some weakness in western Europe."

Salem's comment that IT spending appears to be stabilizing echoes those made by other enterprise IT vendors such as IBM in recent weeks.

Server sales were down about 30 percent last quarter, according to data from research firms IDC and Gartner, and that decline has hit Symantec too, Salem said during a call with financial analysts. "Server market deceleration continued to put pressure on the business, particularly in new-license sales on the Sun platform," he said.

Symantec's storage products are popular on Sun's Solaris OS, but customers have held off buying new equipment as Sun waits for its Oracle buy-out to be approved by regulators.

Consumer revenue was up 6 percent year-over-year and Salem said he did not expect third quarter sales to be affected by Microsoft's free Security Essentials antivirus software, which became available earlier this month.

For its third quarter, Symantec said that earnings should be around $0.36 or $0.37 per share on revenue of around $1.5 billion -- estimates that are largely in-line with analyst expectations.

Also Wednesday, Symantec said it would buy back $1 billion in company stock. "We did authorize a $1 billion share repurchase and that's because we have a lot of confidence in our business model and our cash flow," Salem said.

Symantec's stock (SYMC) dropped $0.43, trading at $15.73 on after-hours markets, after the earnings results were made public Wednesday evening.

IDG News Service

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