Why Symantec Slashed Its Dividends
Symantec's Fiscal 4Q16 Earnings Miss Analysts' Estimates
Symantec slashed its dividends to complete its $400 million efficiency program
Previously in this series, we discussed Symantec’s (SYMC) fiscal 4Q16 and 2016 results. With a market cap close to ~$11 billion, Symantec is a leading player in the cybersecurity space.
However, the changing IT scenario and emergence of new cybersecurity players like Palo Alto Networks (PANW), Fortinet (FTNT), and FireEye (FEYE) has made it challenging for the company to report revenue growth.
Although Symantec (SYMC) is transitioning its operations more toward Enterprise Security and reducing its dependence on the Consumer Security business, growth continues to be elusive.
In accordance with the company’s $400 million efficiency program, Symantec slashed its quarterly dividend to ~$0.08 from the earlier $0.15. Earlier in the series, we discussed that the company announced layoffs to keep its costs under control. Let’s see how the company’s financial position was in fiscal 2016.
Symantec’s cash, debt, and cash flow position
In 4Q16, Symantec reported that it has $6.0 billion in cash, cash equivalents, and short-term investments. The significant increase in cash reserves was due to the completion of the Veritas sale to Carlyle Group in 2016.
As of April 1, 2016, Symantec carried $2.2 billion in total debt on its books. All of Symantec’s debt is long term. In fiscal 2016, Symantec’s non-GAAP (generally accepted accounting principles) net income and EPS (earnings per share) were $698 million and $1.03, respectively. Its operating cash flow stood at $838 million.
Because Symantec is a subscription-based business, it enjoys a negative cash conversion cycle. That means it can manage its working capital judiciously.
Fiscal 1Q17 and 2017 expectations
For 1Q17, its current fiscal quarter, Symantec expects its revenue and EPS to range from $865 million–$895 million and $0.24–$0.26, respectively. Symantec’s revenue guidance for fiscal 1Q17 fell short of analysts’ expectations, which anticipated revenue guidance of $881.3 million. The company’s EPS guidance of $0.24 met analysts’ estimates.
Investors who wish to gain exposure to Symantec can consider investing in the Technology Select Sector SPDR ETF (XLK). XLK invests 35% of its holdings in application software. It invests ~0.34% of its holdings in Symantec.
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