With sales of security software predicted to rise this year by Gartner, one of the top security software houses, Symantec, appears to be struggling in the very market it should be dominating.
The firm’s latest quarterly results for the third quarter of 2013 (ending December) showed that user productivity and protection (e.g. antivirus software) represents 42 percent of its revenue but has declined 4 percent year-on-year.
Information security (encompassing a wide range of business-oriented software) accounted for another 19 percent, showing 3 percent declines, while information management (and even larger range) made up for the remaining 39 percent and dropped 6 percent.
Ironically, thanks to restructuring and deferred revenue by CEO Steve Bennett, appointed in June 2012 to sort out a "bloated" house, profitability rose despite a fall in overall revenues compared to a year earlier. Shares fell.
"Although revenue declined, we exceeded our expectations in operating margin and EPS. While we won't be pleased until total business activity is growing again, I'm happy with our financial results given the massive changes in our business," said Bennett.
“We are where we expected to be at this point in our 3-to 5-year transformation, as we continue to make the changes needed to achieve our long-term targets."
Commentators will point to trouble in the PC market as an explanation for Symantec’s struggles but this seems too simplistic. The consumer PC segment has suffered but deeper forces could also be at work, including a waning of the price that can be charged for traditional money-spinners such as antivirus software for Windows PCs. There could also be more competition from specialist freemium-driven rivals that focus on this market and no other.
These concerns get lost in the accounting speak that dominates quarterly financials. It was noticeable that sales in Asia declined 12 percent but even in the US revenues were down 4 percent,which should set off some alarm bells.
An alternative view is simply that of a traditional software firm in the throes of tilting its business towards services, including those delivered from the cloud.
“As Symantec continues to streamline offerings, the company will reload its value proposition through new partnerships in emerging markets, including network security and third party managed services,” suggested Matthew Casey of analysts Technology Business Research.
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