Is Symantec Overpaying for Vontu?

Symantec (SYMC) shares are lower today following a downgrade by Lehman analyst Israel Hernandez and mixed reaction to the company’s announcement late yesterday of plans to acquire privately held Vontu for $350 million in cash.

Lehman’s Hernandez today cut his rating on the stock Equal Weight from Overweight, while keeping his price target at $22. “Given lingering sales execution challenges and inability to re-accelerate top-line growth, we believe the stock is likely to maintain the current trading range for the foreseeable future and see few near-term fundamental catalysts despite the attractive valuation at 15x ‘08 earnings,” he writes.

Meanwhile, there are some concerns that the company is overpaying for the data leakage prevention company Vontu, in a deal which had been widely expected.

Jonathan Ruykhaver, an analyst with ThinkEquity, trimmed his price target on the company today to $22, from $24, while maintaining an Accumulate rating. He notes that the deal will be dilutive to earnings by about 1-2 cents a share in the March 2008 fiscal year. Ruykhaver says he is “impressed by expected product synergies,” but that the deal is not a cheap one, at 8x expected 2007 bookings.

John DiFucci, an analyst at Bear Stearns, has kindred concerns. “This acquisition appears to make sense from a strategic perspcetive, but we can’t help but question the price paid for the asset,” he writes. DiFucci notes that the company is paying $350 million for a market that Gartner sees at just $150 million in 2007. DiFucci maintains an Underperform rating on the stock.

Katherine Egbert, an analyst at Jefferies & Co., maintains a Buy rating on the stock, but she also has some reservations on the deal, noting that “they paid a healthy premium,” and that “Vontu’s 20% financial sector exposure raises a red flag.”

Symantec Tuesday is down 74 cents, or 4%, at $17.62.

Comments

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The Acquisition Of Vontu, Make Sense From A Strategic Perspcetive!
Noting More Then 1 Great Deal !

Jan 01 12:13 PM