Symantec set to release a blizzard of upgrades
J. Thompson promised 15 new products or upgrades this quarter. We are about to see them. These include:
Newere versions of Norton AntiVirus for Windows, Systemworks 3, Norton Utilities 2000, Cleansweep 2000, ACT 5.0, Norton Ghost, Norton 2000.
For the Mac Platform, we have a new version of Norton Antivirus and Norton Utilities.
Typically, about 20% of customers of existing products upgrade. This number will probably be higher for NAV. Besides, subscription revenues are substantial for NAV and Systemworks. Both NAV and Systemworks are in the top 3 or 4 best selling software categories for several weeks now.
In the Corporate sector, Norton is gaining faster than expected. Apparently, Corporate revenues have as much as 50% of revenues as deferred revenues. So the 46% in Corporate revenues last quarter portends good quarters ahead.
The free PC movement (when signing up for internet access for 3 years) should help Symantec. The solid gains by Apple (now up to 12% of all personal computers sold) is a big plus for Symantec. We are also going to see a personal firewall product in October. J.T. should really help in increasing SYMC's penetration of the Corporate market. We should see the Internet group spinoff this quarter, We also anticipate a major ISP signing some deal with SYMC at any time now. What this deal will entail, I don't know. Perhaps, it will be similar to the Sprint - TrendMicro deal.
The negatives for SYMC is that NETA is giving away products for free. McAfee Office can be got for free. McAfee Viruscan is also being given away for free. I don't know what is going to happen to the $200 million that NETA has in the pipeline. If any of that is Viruscan or Office, then the $200 million will be reduced substantially. Another negative for SYMC is the imminent spinoff of McAfee.com which should garner some attention for NETA. The success of TrendMicro is also somewhat of a negative for SYMC.
In any case, SYMC is selling very cheaply based on its projected earnings for about $1.90 for the year ending in March 2000. The analysts are missing the subscription revenues which is a relatively new feature (unless I am wrong and no one ponies up $29.95 for Liveupdate a year). In any case a PE of 20 based on this year's earnings is quite low. That will still give a target of $38. Based on the next year's earnings estimate of $2.25, the target is $45. Given the rapid growth in PCs, the decline of NETA, the growth of the Mac market, the DSOs of SYMC of only 31 days, the 46% revenue contribution from the Corporate Market in the last quarter, the increased spending by individuals and small businesses on the Y2K problem till the end of this year, the new product cycle we are hitting, the easy comparisons with last year, the new energizing leadership of J.T., the spinoff of their internet group, SYMC is a very good buy here.
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