>>the company overpaid big time for Axent<<
I don't agree. At today's price (trading consistently with the 1/2 share of SYMC being offered for each AXNT share), AXNT has a market cap of about $720 MM. AXNT has no debt and $121 MM in cash. SYMC, therefore is paying about $600 MM for the operations at AXNT. AXNT did about $65 MM the first 2 Qs of 2000, giving it a FY 2000 run rate of about $130 MM (not accounting for the 30%+ revenue growth it showed last Q). So SYMC is paying about 4.5 times FY 2000 run rate sales for AXNT. SYMC itself will probably do about $800 MM in revenues this FY, and sports a market cap of about 3.2 billion (including options), giving it a PSR based on FY 2000 revenue run rate of about 4.
The 13% PSR premium SYMC is paying for AXNT (4.5 PSR vs. 4 PSR) seems small to me, particularly in light of AXNT's deep enterprise ties and SYMC's stated belief that the combined company will grow revenues 30% a few years out. I just don't see this as overpaying in these days where double-digit PSRs for software and service companies are the norm. I believe that the market is currently focusing on short-term dilution (1H CY2001), but should after the deal closes begin to focus on accretion beginning in 2H 2000.
The other thing the longs need to remember is that SYMC ran from about $12/share to $80 share from spring 1999 to spring 2000. It needs a little time to rest, even if some (including me) believe it is currently undervalued. As viruses become more prevalent in PDAs, etc., I am hopeful that the market will give the AV companies a more generous multiple. After all, how many companies have a database with all known viruses? Maybe 4? 5? The notion of automatic, wireless updates to all sorts of hand-held devices on a subcription service just might catch the fancy of a few more investors. What if each of us paid $3 a month, as part of our cell phone bill, for AV protection? Massive potential.
RK |
