Computer security expert
Symantec (Nasdaq: SYMC) is facing more rivals
than ever before. Those competitors are also bigger,
stronger, and seemingly more determined than ever to cut
larger slices of the security market. You don't see Symantec
cowering in a fetal position, though.
Microsoft (Nasdaq: MSFT) is
perhaps the biggest threatthanks to the free Security
Essentials suite
andthe security measures built into the
just-launched
Windows 7platform. It's hard to compete with free, and
it's hard to overcome the default solution that ships with a
new system (just ask Netscape or Firefox!). Microsoft is
firing sharps on both fronts.
On the other side,
Cisco Systems (Nasdaq: CSCO) is busy
gobbling up security providerslike IronPort and ScanSafe.
Cisco is not a big name in security -- yet. But this
acquisitive strategy is putting together a strong security
stable that may soon rival the offerings from incumbents like
Symantec and
McAfee (NYSE: MFE).
But these threats are not hurting Symantec today. In the
second quarter, Symantec saw sales fall a mere 3% from 2008
levels to $1.47 billion, while the backlog of deferred
contract revenue grew 7% to $2.91 billion. This adds up to a
strong base of recurring revenue that more than makes up for
a drop in short-term spending and one-off license deals. And
51% of the sales happened abroad. If this business model is
starting to sound familiar,
you're probably thinking about
IBM (NYSE: IBM) or
Hewlett-Packard (NYSE: HPQ) of recent
vintage.
The strong sales trickled down the income statement to
product earnings of $0.18 per share, 20% higher than last
year's $0.15 per share. For the next quarter, management sees
even more contract revenue building up while top-line sales
stay at about $1.5 billion. It's a beautiful model, and the
fact that Symantec's customers are so eager to sign long-term
licenses and support contracts tells me that they won't jump
to the new competition any time soon.
Do you use Symantec's Norton security products, or do you
just go with whatever Microsoft hands down from On High? If
you're one of those
Apple (Nasdaq: AAPL) mavericks, did you even
know that there's a Norton suite for Macs? Consumer sales are
big for Symantec today -- the segment accounted for more than
30% of company revenue -- so please help me understand how
real people think about these things and leave a comment
below.
This article was originally published as
Symantec Locking Up Profits (and Customers)on
Fool.com
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