Symantec Corporation (SYMC) reported earnings per share (“EPS”) of 38 cents in the fourth quarter of 2013, comfortably beating of the Zacks Consensus Estimate of 33 cents. The EPS was much lower than the year-ago quarter, as the company has gained $526.0 million from the sale of asset in the previous year.
Symantec reported revenues of $1.75 billion in the quarter, up 4.0% year over year from $1.68 billion. The revenue growth was supported by strength in License revenues, which improved substantially backed by License renewal.
Revenues from the Consumer segment moved up by 1.0% year over year and represented 30.3% of the total revenue. Security and Compliance segment (around 29.3% of the total revenue) increased 2.0% on a year-over-year basis. Storage and Server Management segment represented around 36.3% of the total revenue and reported year-over-year growth of 7.0%. Lastly, the Services segment represented 4.1% of the total revenue and grew approximately 9.0% on a year-over-year basis.
The company generated around 51.3% of the total revenue from the International market, up 2.0% from the year-ago quarter. Moreover, The Americas, which include the United States, Latin America and Canada, represented around 54.7% of the total revenue, and witnessed year-over-year growth of 6.0%. The Europe, Middle East and Africa region (27.6% of revenues) grew by 6.0% on a year-over-year basis. Asia-Pacific/Japan revenues (contributing around 17.6% of the total revenue) registered a decline of 4.0% on a year-over-year basis.
Gross margin in the quarter was 82.4%, down 50 basis points (bps) from 82.9% in the year-ago period. Gross margin declined as cost of revenues increased at a higher rate than revenues.
Operating margin was 14.4%, up 270 bps from 11.7% in the year-ago quarter. Operating margin grew as a result of lower operating expense, arising from a decrease in selling and marketing expenses and flat general & administrative expenses.
Net income attributed to Symantec in the reported quarter was $188.0 million or 26 cents per share compared with $559.0 million or 76 cents per share in the year-ago period.
Excluding special items like operating expense adjustment, non-cash interest expense and related tax adjustments but including stock-based compensation expenses, adjusted net income in the quarter was 38 cents per share compared with 36 cents per share in the year-ago period.
Balance Sheet & Cash Flow
Symantec registered cash, cash equivalents and short-term investments of $4.75 billion, up from $4.25 billion in the previous quarter. Long-term debt for the company remained unchanged at $2.09 billion. Cash flow from operating activities was $1.59 billion.
During the quarter, Symantec repurchased 49 million shares for an amount of $826.0 million at an average share price of $16.98 per share. The company has initiated a cash dividend payment of 15 cents per share.
For the first quarter of 2014, we expect GAAP revenues in the range of $1.61 billion to $1.65 billion, down from $1.67 billion in the year-ago period. Symantec expects GAAP operating margin in the range of 8.6% to 8.7%, down from 16.1% in the year-ago period. Whereas, non-GAAP operating margin is expected in the range of 22.6% to 22.7%, down from 26.1% in the year ago period.
Symantec expects earnings per share on a GAAP basis between 11 and 12 cents per share as compared with 24 cents in the year-ago period. Whereas, non-GAAP earnings-per-share are estimated in the range of 35 to 36 cents as compared with 43 cents in the year-ago period.
Symantec has delivered decent fourth-quarter 2013 results, with EPS surpassing the Zacks Consensus Estimates and revenues increasing from the previous quarter. Symantec expects a sequentially weak EPS in the next quarter, which seems justified given its plans for additional investments in some operating areas.
Moreover, the operating performance of the company was good, but the uncertainty over PC sales is going to affect its Consumer segment throughout the year. Moreover, as smaller companies like Kaspersky are consistently bringing comparable products to the market, competition continues to intensify. Reduction in tech spending, stiff competition from McAfee-- acquired by Intel Corp. (INTC), as well as the prevailing economic turmoil in Europe may have some dampening effect on Symantec’s business prospects.
Symantec has a Zacks Rank #2 (Hold).
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