The real value is in the data/information, versus hardware, as Symantec Corp. expects to leverage virtualization, cloud and mobile to drive growth.
“We had the opportunity to market with Symantec management and believe they are focused on the right vision: to be the premier Switzerland/hardware agnostic vendor to manage and secure data,” said Robert Breza, an analyst at RBC Capital Markets.
He has seen this approach successfully executed before and tend to agree that while hardware can/will change, data is persistent, and by controlling and securing data, Symantec should continue to have high renewal rates and strong cash flow generation.
He didn't get the sense that deal cycles have changed materially, as they likely remain at elevated levels post 2008/09. In addition, he believes the VeriSign business should continue to provide upside to estimates going forward as the company has done a good job leveraging recent acquisitions.
Symantec remains one of his favorite names from a thematic perspective and he believes it should continue to deliver consistent results.
Virtualization: Customers buy commodity hardware, virtualizes and then secure these environments by leveraging Symantec's virtualization capabilities in products such as backup.
Cloud: Give the customer a choice of how to consume solutions: on premise, cloud, or hybrid. Management believes the hosted business should grow 2 times faster than the overall business.
Mobile: Remains one of the holy grails of security, but management believes upcoming products such as Norton One (expected in 2012), which is designed to protect the user across all of their devices, should help.
Breza said the focus for investors continues to be on consistent execution and management believes the quality/breadth of products along with better sales execution should help the company build on four nice quarters.
The ability to cross-sell both security and storage into about 50 percent (about 25 percent year-over-year) of $1 million-plus deals last quarter was impressive, and management expects that to increase longer-term. He also believes more realistic guidance and strong market tailwinds for security have also helped.
He said government spending on security should remain elevated while Health Care is another fast-growing vertical. APAC should remain the fastest-growing geo (off a smaller base) while management seems pleased with improvements in EMEA execution.
Symantec’s management is encouraged by its ability to cross/up-sell consumers after bringing the e-commerce store in-house and believes this business isn't as leveraged to PC growth anymore (ex. Comcast partnership).
The brokerage maintained its “outperform” rating on shares of Symantec with a price target of $22.