Tuesday, January 16, 2007

Color on datapoint: Symantec (NASDAQ:SYMC)

We have couple of firms issuing some very interesting comments on Symantec (NASDAQ:SYMC) after NPD data on Thursday showed meaningful weakness in box security products:

- Piper Jaffray notes distributor NPD data released on 1/11 shows a 21% yoy decrease in Symantec sales for the Dec-06 quarter. Street revenue consensus for Dec-06 is up 20% yoy. Separately, NPD data suggests an 11% sequential decrease in Dec-06, and the Street consensus is looking for up 1% sequentially.

The firm is defending SYMC saying they have compared the historical NPD sales data and the company reported data since Jun-05. The result is, NPD data has historically underestimated Symantec consumer yoy revenue growth by an average of 17%, and the magnitude of the understatement is increasing. According to PJ this is due to the fact NPD data tracks retail box products, and does not track sales made online. Separately, Symantec's 30% subscription price increase from last August would not be captured by NPD.

Also, in December of 2005, Symantec shifted the consumer business to a fully ratable revenue recognition model. Although it is difficult to quantify it, they expect the consumer numbers in the December 2006 quarter will benefit from this shift. Maintains Outperform and $27 tgt.

- UBS on the other hand notes that last year SYMC did not release its date until 1/10. The firm is modeling F3Q07 rev & EPS of $1.34b and $0.29. SYMC mgt has yet to return calls which coupled with no EPS release date raises the possibility that a negative pre-announcement could be forthcoming.

According to the firm 2 factors that could be impacting SYMC's EPS date 1) the "go live" of its
consolid. ORCL ERP system post-close of Veritas acq. (at times launch of these systems has impacted many co's ability to recognize rev) and 2) Vista launch at end of this month which has impacted retail PC shipments (as evidenced in NPD data). If rev were pushed out for either reason, it would likely be realized in the Mar Q.

While consumer security represents 29% of our F3Q07 sales fcst for SYMC, MFE.com consumer sales are 37% which includes their direct sales as well as more recurring ISP rev stream. Retail for MFE, (which NPD corresponds to) is only 5% for MFE. Although the NPD and Vista hardware deferment are negative for both co's, they see the data as more negative for SYMC given MFE's more stable ISP rev stream. Maintains Buy and $24 tgt.

Notablecalls: Firstly, I'm still kicking myself for not writing up the NPD call on SYMC/MFE for NC on Friday! Secondly, PJ's defense of SYMC is likely to catch them with their pants down. You just don't go against a major datapoint like this one. I went over every datapoint on SYMC over the weekend and I must say I was surprised by what I saw. I think SYMC has been losing ground. None of the major firms has paid attention. Kudos goes to UBS for their excellent point regarding the timing of earnings release. I bet Heather Bellini, the analyst covering SYMC for UBS was out with the call already on Friday! Anyway, I think SYMC is a short here despite the oversized downside move the stock made on Friday. Actionable call alert!


dcxavier said...

This is the time of year I buy TurboTax. In years previous, I've seen free (after rebate) anti-virus and other PC utilities with the purchase of tax software. This year, nothing. I've also noticed that Turbotax is selling for $5 more than previous years. I think INTU is going to do very well. SYMC and MFE are not going to push nearly as much product.

rollingbicycletours said...

good call on SYMC today