Seeking Alpha
Research analyst, long/short equity, tech
Profile| Send Message| ()  

Symantec (NASDAQ:SYMC) is the global leader in the security software market, and sells a number of products to consumers and enterprises. Some of the products include the Norton line of antivirus products for consumers, and it also offers data loss prevention and data encryption products for enterprises. In the consumer antivirus market, Symantec competes with McAfee, now part of by Intel (NASDAQ:INTC), as well as Microsoft (NASDAQ:MSFT), CA (NASDAQ:CA), AVG, TrendMicro and Kaspersky Labs.

Although Symantec is the leader in the consumer antivirus market, its market share has declined in the past few years. Here we look at the challenges that Symantec faces in this market and how it plans to overcome them. We estimate that Norton antivirus software accounts for around 33% of our $21.24 price estimate for Symantec stock. Our price estimate is about 20% higher than the market price.

Symantec’s Losing Market Share

Symantec’s share in the consumer security software market has declined from around 57% in 2007 to around 46% in 2010, and we expect it to continue to decline to around 42% by the end of Trefis forecast period. The main reason for the decline has been the gaining of the popularity of free alternatives available in the market. For example, Microsoft’s “Security Essentials” is essentially free, can be conveniently installed through Windows Update System and identifies malware fairly accurately. We wrote a previous note on this challenge titled Symantec’s Challenge From Microsoft Security Software.

Chart created using Trefis' app

What Could Symantec Do?

What is Symantec doing to halt this decline? Symantec has realized that offering antivirus products on a stand alone basis will not win it the market share battle alone. Instead, it has started to offer a variety of products, which works on multiple platforms. This strategy could help Symantec up-sell and cross-sell its Norton line of products. For example, Symantec has started to offer Norton Online Backup, a data recovery software. This software has seen rapid customer adoption, which we highlighted in an earlier note titled Higher Demand for Norton Backup Software Means Upside to Symantec’s Stock.

In its earnings announcement, Symantec mentioned that it continues to expand its Norton offerings into alternative channels such as LG Electronics and Adobe (NASDAQ:ADBE), which is helping it expand its customer base. [1] Symantec is also trying to diversify its business beyond PCs to mobile and tablets with its Norton Everywhere initiative. [2]

Can these initiatives help Symantec regain its lost share in the consumer security software market, or will it continue to decline? It will be difficult to say at this point, but the above mentioned initiatives certainly provide Symantec the opportunity to do so.

See our full analysis for Symantec.

Notes:

  1. See SeekingAlpha: Symantec FY Q3 2011 earnings conference call transcript, January 2011
  2. Symantec press release, Norton’s ‘Beyond-the-PC’ Initiative Expands with New Partnerships and Technologies, February 2011

Disclosure: No positions

Source: Symantec Is Fighting for Market Share With Initiatives