Symantec Down Sharply After Earnings Warning, Ratings Downgrades
Shares of Symantec are continuing a day-long sell off after the software maker warned of disappointing December-quarter results and cut its full-year outlook, blaming weak sales of data center software and higher-than-expected costs.
Symantec fell as much as 12% as analysts said the shortfalls raised questions about the ability of top executives to manage the business to meet their own goals. It was the second consecutive quarter in which earnings missed expectations.
"Symantec unfortunately continues to be a major work in progress," FBR analyst Daniel Ives said. He cut his price target on the stock to $18 from $19.
Symantec estimated a profit of 10 to 11 cents a share on revenue of $1.29 billion to $1.31 billion for the fiscal third quarter ended Dec. 29. It had previously forecast a profit of 14 to 15 cents a share on revenue of $1.315 billion to $1.345 billion.
It also forecast full-year net income of 36 to 39 cents a share on revenue of $5.08 billion to $5.11 billion. In October it had forecast a profit of 46 to 56 cents a share on revenue of $5.1 billion to $5.3 billion.
For its fiscal fourth quarter, which ends in March, Symantec estimated revenue between $1.24 billion and $1.27 billion. That lagged the average estimate of $1.4 billion from Wall Street, according to Thomson Financial.
Robert Stimson, an analyst with WR Hambrecht said the problems were related to issues unique to Symantec and were not part of a wider trend that hurt other software makers.
In a Symantec conference call for analysts, Stimson criticized company executives for not disclosing the problems until two weeks after the close of the quarter. He said they should have identified the problem and disclosed it to investors closer to the Dec. 29 close of the quarter.
"Why are we finding out about costs now?" he asked the executives.
In that conference call, Symantec Chief Executive John Thompson apologized for the shortfalls, saying he was taking actions to improve his ability to forecast results.
He blamed the problems on weaker-than-expected sales of software that helps run corporate data storage centers. Symantec acquired that business in July 2005 when it purchased Veritas Software.
Thompson also cited a greater-than-expected proportion of sales on which revenue must be deferred to future periods. He told analysts that the company is adjusting its model for forecasting revenue based on the change in its sales mix.