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Symantec Corporation Message Board

  • long_term_tech_investor long_term_tech_investor Oct 26, 2012 9:08 AM Flag

    Is Symantec Misleading Investors?

    Two potentially misleading indicators that investors would be wise to view with extreme caution:

    1) This week's earnings report
    2) WIndows 8 marketing claims.

    In more detail:

    1) There is no rational explanation for the over-performance on alleged revenue generated during the recent quarter other than quarter-stuffing. Even today the Department of Commerce specifically cited a severe slowdown in software spend. On the heels of a broader large-cap (and tech sector) slowdown, a macro slowdown (especially the Euro zone which Symantec is exposed). The fact some sizable Symantec products actually under-performed further underscores something is very suspect with the "performance" during the quarter. Then, factor in the sudden departure of the Executive head of Sales and you start to put the pieces together. All evidence points to lots of up-suit discounting on big deals transpired, and likely across the broader product suite, and in that event the numbers reported are simply not real in terms of begin reflective of operations during a "normal" quarter. This will catch up with the company sooner rather than later as it is simply a near-term mirage. There is also surely an element of severe internal pressure from the new CEO's subordinate managers desperate to look good and protect their jobs which has contributed to the quarter results, but again, this only creates a near-term result and unsustainable on this basis.

    2) The Windows 8 marketing claims are going to have a tendency to be misleading in the sense they are being portrayed. The "Symantec is 50% faster" style claims are based in large part off on-demand scanning. This is largely a red-herring to the vast majority of users as scanning occurs in the background and is not something they are concerned about from a performance perspective. Further, data sets (file size, file type, data distribution, data layout, etc) can radically impact performance results and I can guarantee that Microsoft could put together a test suite that would show results very different from what Symantec is marketing simply by making alterations to the test schema. Furthermore, the Defender team in Microsoft will easily take the Symantec product and study what it does and make the necessary alterations. When Microsoft owns and controls the file systems & kernel it is foolish to think that Symantec is going to somehow stay ahead of Microsoft's performance for long, if indeed the claims are even relevant to users. I applaud Symantec at least making at attempt to stem the bleeding and erosion of their market share WRT Microsoft, but the marketing claims are not going to attract new customers, at best they will only temporarily slow the departure of paying customers in lieu of Microsoft's in-the-box offering. Microsoft is sometimes slow to the plate but they eventually get things right (or close enough) such that the vast majority of consumer-segment users will no longer opt to pay for the Symantec product.

    In short, what I'm driving at here is there is a classic game under way by both by the company and by Wall St. so be sure to do your homework in how you choose to invest in the shares, or manage your existing positions.

    LT

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    • This post brings to mind the adage: Extraordinary claims demand extraordinary evidence.

      On the surface you state that all evidence points to the revenues not being reflective of normal operations. Taking a look at the specifics you use to justify this statement:
      1) On a macro level the software sector experienced a severe slowdown as did the EU where SYMC has significant revenues.
      2) The sudden departure of the Exec VP of sales.
      3) DSO increased (added post).

      Looking at each of these in turn:
      1) In looking at the recent Commerce dept release of modest GDP growth in consumer spending, I don't see anything that would cast doubt on SYMC results. I'd appreciate hearing more about the data points to which you refer as it could provide evidence that SYMC is outperforming, though I don't see that either.
      2) The Exec VP of sales was asked to leave by the company. This is typically a sign of underperformance and a feeling that a change will lead to better results going forward. I've not seen a scenario over the years of a company misstating revenues and then firing the head of sales for lack of performance. In fact this is counter-intuitive as that could lead to a unlawful termination lawsuit by the exec forced out. If you have further info that would add credence to your supposition, I'd appreciate your providing it.
      3) As you mentioned, SYMC has a significant revenue contribution from the EU. The EU is always unusual in the Sep quarter given the vacation traditions. Consequently, the logical analytic is to look at Sep DSO's over the years to support your claim. The trend is as follows:
      Sep-13 39 days
      Sep-12 38 days
      Sep-11 42 days
      Sep-10 42 days
      This doesn't seem to show any evidence whatsoever of cramming the channel.

      I can't see any evidence to support your claims, much less the extraordinary standard that seems warranted. Add to that your statement in another post that you would be a buyer in the $17's is very telling. If you really felt they were misstating revenues, you would be unwise to buy after a minimal 5-10% correction. A potential restatement of earnings or disappointment driven by reversing this situation would likely lead to a far greater price reaction.

      I just started looking at the company again after a few years away. No position as they appear to be fairly/over valued here. Pros: Mobile security/cyber security is a tailwind looking forward. Cons: balance sheet, cash flows, current growth rate, no dividend.

      • 1 Reply to marty.chilberg
      • Interesting feedback but not exactly providing much evidence to counter my concerns/claims, rather casting doubt with nothing to really back it up.

        I suggest you should go read the article "Is Symantec Growing or Slowing" It will more clearly explain to you why Symantec likely stuffed the quarter rather than hearing it from me. In fact, I am certain this is what happened through steep discounting on large up-suite deals. DSO's alone are not the full story. The real question you should be asking yourself is why would Symantec suddenly produce results counter to the 90% of other tech companies? Go ahead and believe the growth and earnings are real, you will be sorry the next quarter or two if indeed the stock reacts and trades based on fundamentals.

        I can also tell you that from being in the industry for over 30 years and having been inside countless tech companies, when a head of sales is suddenly asked to leave after a reasonable tenure it is far more likely the CEO is asking him to do something he is not comfortable doing. More often than not it is to achieve near term results at the expense of long term damage, or requests for actions that could mislead shareholders. And by no means is this necessarily criminal, in fact usually not (although it probably should be). But it is nonetheless and indicator that should be paid attention to and measured in context as things roll forward. You must not heard the reason the CEO gave, and how the structure is now defined, that too is telling, but clearly you have much homework to do.

        The stock is closer to fairly valued in the 17's based on long-term as well as recent history and also my understanding of where the company is headed (not the hype, hope or misinformation being floated around). While still not without risk, nibbling in the sub-18 range also has some built-in technical support levels that should make for a reduced risk exposure on a downside event. But adding positions over 18 is truly foolish, and 19 insane. But there will no doubt be the same hypers and gullible investors. The last two trading days were absolutely classic in this sense, fund re-allocating and misguided associations with another company that I will not even bother mentioning. All I can do is provide what I know to be sound analysis, much more than the average investor would tend to run across, and hope it can help people make sound investment decisions. Specifically to avoid investors from getting burned by this company any more than they already have the last 8 years. With every major "event" there will be people unfairly profiting at the expense of others, just like the storm Sandy in the Northeast. My only intention is try to level the field so the individual investors can see the game for what it really is and make better decisions, and for fellow long-holding-longs to also be aware of what is really going (as opposed to what is being spun).

        LT

    • Almost forgot to mention...

      There are now many articles available citing the analyst reaction to the recent earning report, and the vast majority are taking a cautious "we need to see continued execution" stance as well outright stating sentiments along the lines of "the shares are trading at levels with certain expectations of change". I could not agree more. Said another way, the analysts are not really buying the recent results and/or at least want to see a few more quarters for proof. Many are also (either implicitly or explicitly) warning the share price is already inflated on assumption of the perfect storm of a dividend, execution, divestiture of sorts, and a strategy that is believable to achieve the CEO's 5/30 vision. Meaning, if any one of those things doesn't come to fruition, the shares are going to experience downside stress.

      Of course, there will be a few small outliers and editorials doing the classic pumping games, but in general the analysts seem to have approached this situation with prudence. Not quite as forthright in layman's terms for the little investor as I would personally prefer, but that is the unfortunate nature of the game.

      LT

 
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