Symantec's Q2 Results Boosted by Cyber-Attack Fears, Demand for Data

Symantec posted strong fiscal second-quarter results based on continuing demand for security and storage products despite weak PC demand and an uncertain economy.

Fear of cyber-threats and ongoing demand for digital information boosted Symantec's second-quarter performance as enterprises and consumers continued to buy its security and backup products, the company said.

The company reported fiscal second-quarter revenue of $1.68 billion, a 14 percent increase from last year's revenue of $1.48 billion. Symantec's net income was $182 million, or 24 cents a share for the quarter ended Sept. 30. The company beat the top end of its own revenue estimates. Excluding some costs, earnings were 39 cents per share, which was on target with analyst estimates.

Also boosting Symantec's bottom line were the two acquisitions, VeriSign and Clearwell, according to Symantec CEO Enrique Salem on the company's earnings call on Oct. 26. VeriSign, the identity management company Symantec acquired a year ago for $1.28 billion, generated $89 million in revenue during the quarter. Clearwell, acquired in May for $390 million, generated $20 million. The acquisitions performed well "against our expectations," Salem said.

"We continue to effectively integrate and grow our acquired assets, as demonstrated by the authentication business once again generating strong results for the fifth consecutive quarter," said James Beer, Symantec's executive vice president and CFO.

Beer also noted there continued to be strong demand for security and storage products, despite the overall concerns about the uncertain economy. Revenue in the security and compliance and storage and server management segments accounted for 65 percent of total revenue.

The explosion of cyber-attacks and the increasingly sophisticated nature of threats are driving consumers and enterprises to invest in security products, according to Salem. Threats are more targeted and attackers are going after everyone, including individuals, small businesses, large enterprises and government agencies, he said.

The security and compliance segment had the strongest performance of all Symantec businesses, with a 27 percent boost in sales. The segment includes enterprise security, managed security services, data loss prevention and authentication.

Salem touted the success of Symantec Endpoint Protection 12, which launched in July and has already been deployed on more than 1.3 million endpoints. Customers are "increasingly relying" on Symantec's Managed Security Services to protect their environments and information as they struggle to meet IT staffing needs, according to Salem.

The data loss prevention business performed well "as information protection continues to be top of mind for corporations and governments around the world," he said.

The storage and server management segment climbed 8.6 percent, led by Symantec's portfolio of backup products. Storage growth was strengthened by the fact that Symantec's backup products include deduplication technology and virtualization capabilities, according to Salem.

Adoption of NetBackup appliances grew during the quarter as customers took advantage of "backup, deduplication and the media server in a single appliance," Salem said.

The Clearwell eDiscovery team, in its first full quarter with Symantec since the acquisition, signed the largest deal in its history with the federal government during the quarter, according to Salem. "As expected, Clearwell's eDiscovery solution complements our archiving capabilities," Salem said.

Despite weak consumer demand for personal computers, Symantec's consumer segment increased 11 percent during the second quarter, compared with the comparable period a year ago. Consumer products now make up 31 percent of total revenue, Beer said.

"We continue to see good demand for our products and services across the portfolio," Salem said.