Key takeaways from Symantec's 2Q15 earnings (Part 9 of 14)
Slow phase in PC market adds to antivirus software worries
With the increased penetration and adoption of smartphones and tablets, the PC market is going through a slump phase. The shrinking PC market has had a considerable impact on sales of Symantec Corporation’s (SYMC) security solutions. Although Microsoft’s (MSFT) end of support to Windows XP brought a little optimism to the PC market by slowing its fall, it isn’t expected to post major growth in the near future.
The PC market slump directly impacts Symantec as it cripples antivirus software sales, which consequently impact the company’s overall revenues. Thus, separating storage and security divisions is seen as a rational decision.
ETFs that have significant exposure to Symantec include the PowerShares QQQ Trust ETF (QQQ) and the Technology Select Sector SPDR Fund (XLK). These ETFs are likely to benefit when the company posts positive results.
In the global security market, antivirus software for consumer and corporate PCs constitutes a small part. According to Gartner, the antivirus software market is expected to rise 8% in 2014 to $72 billion. The largest and fastest-growing security areas are services such as consulting, outsourcing, and implementation. Gartner estimates that these services make up approximately more than half of all worldwide spending.
Absence of network security offering makes Symantec lag in IT environment
Symantec doesn’t have a network security offering. Its failure to enter the network security industry exposes it to competitive displacement from its peers who offer more comprehensive enterprise solutions. McAfee (INTC), one of its peers, made key acquisitions of Nitro Security and Stonesoft as part of its network security strategy to add next-generation firewall capabilities.
In 2Q15, Symantec announced plans to launch an advanced threat protection service, although it appears to be late with detection capabilities compared to its peers.
The likely way to enter the network security market is through an acquisition or partnership, which seems unlikely at this stage with the company in the process of splitting itself into two businesses.
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