I'm writing from memory on symc's earnings since I'm not at home. I think that the earnings miss was about 30+% and revenues something like 10-12%. Consumer sales represent about 30% of their mix (I believe that the article you quote is wrong on their percentage). Symc says they missed on consumer sales and currency conversion (and some small biz sales). I think (from memory... so don't quote me) I looked at their numbers and figured they must be selling only half of what they usually do to consumers. (that doesn't take into account currency problems).
So... if you believe that to be true, then when the consumer starts buying pc's again, symc earnings should rebound nicely. BUT... there are other security companies that have missed earnings and they sell to the corporate area. So... is symc fine in that area or are they going to have to guide down later due to corporate softness? The reason I'm wondering about that is symc skated by the pc softness and escaped earnings troubles when msft, dell, etc were all warning last year. Might be that they are late in seeing corporate softness as well.
Are consumer sales going to rebound? The strongest quarter for symc is the one that ends in March with December coming in second. If pc sales pick up (MAYBE Win XP helps, MAYBE back to school spurs pc sales, MAYBE Xmas spurs sales and MAYBE corporations buy new systems or upgrade if they start hiring again). Other than msft, I haven't heard anything to make me think that pc sales MIGHT pick up.... and even msft... I'll wait for earnings, thank you very much. Revenues are higher than expected for msft but does that mean they pushed sales at the end of the quarter? How come they sell into the same market as symc and one comes in with horrible earnings and the other is just peachy (ok, msft is more diversified)? There is a saying that goes around at symc: "What's good for msft is good for symc"... so if you believe msft is going to have increasing sales, then probably symc will follow.
Other than WIN XP upgrades there are no real new products for symc though. What is going to spur sales on the consumer side? If I were sending my daughter to college this year, I'd probably get her a new computer, but other than that, I see no need to upgrade what I have. I bet there are lots of people who feel that way and without a new system, what need is there for new software? Hopefully, I'm the exception, but Win 95 was a bomb dropped on symc stock when it didn't sell all that well when it was released. Who knows how well win XP will do.
When we have companies that haven't warned in many many many years now coming in with horrid misses, I have to wonder how weak the global economy is and how much and quick of a rebound we get. Symc needs an economic rebound or I bet they have to guide down again.
As far as valuation... symc has always been the Rodney Dangerfield of techs. The valuation is compelling (if this represents a bottom in earnings with p/s of 3, cash of 8+ per share and spinning off more and a pe of something like 17) and I'm kind of surprised that they were hammered as much as they were given the valuation. I looked at their guidance and figured that it was probably do-able, but they would have to resume previous sales levels... in other words, this was a one quarter blow up. Symc has blown up in the past, but never under this CEO. One quarter or not, I have no idea. This economy seems to be getting just about every company at some point.
For the record, I no longer own symc. I sold it last year due to slowing pc sales, but it's a company that I owned and know from way back. If I were to buy it, I'd be a buyer around 33ish, but it may not get that low.
TA |
