Symantec Is A Value Trap
Paulo Santos • 19 Comments
Paulo Santos • 19 Comments
Symantec's Renaissance Is On The Way
Hunter Wolf • 26 Comments
Hunter Wolf • 26 Comments
Mon, Nov. 21, 3:58 PM
- Attributed to Symantec's (SYMC +3.2%) planned funding of its $2.3B buyout of LifeLock with $1.5B of balance sheet cash and $750M of incremental debt.
- S&P Global Ratings expects increased debt and lower levels of cash to bring adjusted leverage to more than 4x at transaction finalization and to remain greater than 3x for 12-24 months subsequent that point.
- A more than two notch downgrade is considered unlikely.
Sun, Nov. 20, 10:56 PM
- Symantec (NASDAQ:SYMC) agrees to acquire LifeLock (NYSE:LOCK) for ~$2.3B including debt, in a deal the companies say will create the world’s largest consumer security business with more than $2.3B in annual revenue based on last fiscal year revenues for both companies.
- The deal values LOCK at $24/share, a 16% premium to its Friday closing price of $20.75.
- SYMC says it hopes to integrate the LifeLock product with its Norton antivirus businesses into a single product line after the acquisition closes.
Mon, Nov. 14, 5:10 PM
- Symantec (NASDAQ:SYMC) and P-E firms Permira and TPG are among companies interested in bidding for LifeLock (NYSE:LOCK), Bloomberg reports.
- LOCK is working with Goldman Sachs on the potential sale, which could value the company at ~$2B, according to earlier reports.
- SYMC has been re-orientating its business more heavily toward cybersecurity, acquiring Blue Coat from Bain Capital earlier this year in a $4.65B deal.
Wed, Jun. 15, 2:58 PM
- Bloomberg reports FireEye (FEYE +5.4%) has rejected several takeover offers.
- The report follows speculation a tech giant such as Cisco or IBM will bid for threat-prevention hardware/software/services provider as shares continue trading at depressed levels. FireEye rose on Monday after Symantec announced it's buying Blue Coat for $4.65B.
- Update: Bloomberg reports FireEye hired Morgan Stanley to field offers, and "turned down at least two suitors that made offers below its expectations of $30 or more per share." Symantec (NASDAQ:SYMC) was one of the suitors before deciding to acquire Blue Coat. The sale process is no longer active.
Sun, Jun. 12, 9:22 PM
- Symantec (NASDAQ:SYMC) is acquiring security hardware, software, and service provider Blue Coat (BLCT - was set to go public) for $4.65B in cash. With Blue Coat having posted revenue of $755M in the 12 months ending April, Symantec is paying 6.2x trailing sales.
- Blue Coat CEO Greg Clark will become Symantec's CEO once the deal closes; Symantec announced in April Michael A. Brown will be stepping down as CEO once a successor is found. Symantec chairman/PayPal CEO Dan Schulman will be the company's chairman.
- As part of the deal, P-E firm Silver Lake is doubling its Symantec investment to $1B via 2% convertible notes due 2021, and Blue Coat majority owner Bain is reinvesting $750M in the post-merger company via convertible notes on the same terms. Bain managing director David Humphrey will join Symantec's board. The notes carry a $20.41/share conversion price.
- Symantec: "Blue Coat is the #1 market share leader and share gainer in Web Security with a widely recognized portfolio of integrated technologies serving as a trusted platform to deliver Cloud Generation Security to more than 15,000 customers worldwide ... This transaction will combine Symantec’s leading threat telemetry with Blue Coat’s networks and cloud security offerings to provide differentiated security solutions across hundreds of millions of endpoints and servers, and billions of email and web transactions."
- The deal is expected to close in Q3, and be financed via cash on hand and $2.8B in debt. With Bain having acquired Blue Coat for $2.4B last year, the firm appears to be reaping a 90%+ return. Thanks partly to $150M/year in expected cost synergies, Symantec now expects FY18 (ends March '18) EPS of $1.70-$1.80 (compares with a current FY18 EPS consensus of $1.39). The company still plans to return the $1.3B left to be spent on its $5.5B capital return program by the end of FY17.
- Conference call at 8AM ET on Monday (webcast).
Fri, Jan. 29, 4:15 PM
- As expected, the sale of Symantec's (NASDAQ:SYMC) Veritas storage software unit to P-E firm Carlyle has closed today. The closing comes nine days after Symantec announced it had agreed to a deal revision that cuts its after-tax proceeds by $1B to $5.3B.
- Symantec, now solely focused on security software/services, has used the announcement to state its board has approved a $2B increase for the company's capital return program.
- Symantec adds it's on track to return over $4B to shareholders by the end of March 2017. $1.8B was left on the company's buyback authorization at the end of FQ3 (calendar Q4), and a $500M accelerated buyback was finished this month. FQ3 results arrive on the afternoon of Feb. 4.
Wed, Jan. 20, 8:07 AM
- Citing "uncertainties developed regarding the transaction," Symantec (NASDAQ:SYMC) and Carlyle (NASDAQ:CG) have amended the terms of Carlyle's purchase of Symantec's Veritas storage software unit to cut the purchase price from $8B to $7.4B, and double Veritas' offshore cash balance to $400M.
- Symantec will now be paid $6.6B in cash and left with a $400M equity interest in Veritas. After-tax cash proceeds are expected to total $5.3B, down from an original $6.3B.
- The deal is still expected to close on Jan. 29. The sale price cut follows a Nasdaq selloff, as well as November reports indicating banks had postponed marketing the debt Carlyle planned to use to finance the Veritas deal.
- Separately, Symantec now expects FQ3 revenue, op. margin, and EPS to be above the midpoints of the guidance ranges provided in its Nov. 5 FQ2 report. FQ3 results are due on Feb. 4.
- Symantec has dropped to $18.05 premarket, making new 52-week lows in the process.
Dec. 31, 2015, 7:03 PM
- Cisco (NASDAQ:CSCO) could make a bid for storage array vendor NetApp (NASDAQ:NTAP) and threat-prevention hardware/software provider FireEye (NASDAQ:FEYE) in 2016, thinks FBR's Dan Ives. Cisco/NetApp speculation has been around for a while. Meanwhile, Cisco has made several security acquisitions in recent years, and appears to be up for more, but has also launched products that compete with FireEye.
- Ives also thinks IBM could bid for machine/log data analytics software leader Splunk (NASDAQ:SPLK) and business intelligence/data visualization software firm QLIK. With a $7.6B market cap and high multiples, Splunk would be a costlier acquisition than IBM's traditional fare.
- HP Enterprise (NYSE:HPE), meanwhile, is seen as a potential suitor for both Qlik and enterprise cloud storage/file-sharing leader BOX. And Oracle (NYSE:ORCL) a potential buyer of cloud ERP, HR, and e-commerce software firm NetSuite (NYSE:N). Larry Ellison owns a large stake in NetSuite (more SMB-focused than Oracle), and the company both competes and partners with Oracle.
- Microsoft (NASDAQ:MSFT), which has made plenty of acquisitions in the Satya Nadella era, is seen as a potential buyer of database security software and Web app firewall vendor Imperva (NYSE:IMPV), as well as of cloud vulnerability management and compliance software firm Qualys (NASDAQ:QLYS). Symantec (NASDAQ:SYMC), which has signaled it will make security acquisitions after the sale of its Veritas unit closes, is considered a possible acquirer of e-mail/compliance security software provider Proofpoint (NASDAQ:PFPT).
- Yesterday: FBR sees improving cybersecurity spend, likes several stocks
Dec. 21, 2015, 4:26 PM
- Symantec (NASDAQ:SYMC) and Carlyle previously expected Carlyle's $8B purchase of Symantec's storage software unit to close on Jan. 1. The delay follows November reports stating banks had postponed marketing $5.5B in debt meant to finance Carlyle's purchase of Veritas amid greater risk-aversion among corporate debt buyers.
- Symantec has said it expects net proceeds (after taxes) of $6.3B, and plans to direct them towards both capital returns and acquisitions.
Nov. 17, 2015, 11:43 AM
- Reuters reports banks have withdrawn financing for the $8B sale (announced in August) of Symantec's (SYMC -0.2%) Veritas storage software unit to Carlyle (CG +0.1%). The sale has been expected to close by Jan. 1.
- Symantec hasn't moved much on the report. The market's original reaction to the deal was lukewarm, with Symantec's $1.5B+ expected tax bill sparking criticism. Symantec has promised a large chunk of the deal's $6.3B in expected net proceeds to shareholders, and has suggested it will use some of the remaining funds to make security acquisitions.
Oct. 14, 2015, 7:17 PM
- "You can definitely expect acquisitions from us," Symantec (NASDAQ:SYMC) CEO Michael Brown tells CRN.
- After taxes, Symantec expects $6.3B in net proceeds from the $8B sale of its Veritas storage software unit, which is expected to close by Jan. 1. A large chunk of that cash is expected to be returned to shareholders - in tandem with the Veritas deal, Symantec hiked its buyback authorization by $1.5B to $2.6B - but that still leaves plenty of room for M&A.
- Brown adds Symantec is specifically eyeing acquisitions related to threat protection, information protection, and cybersecurity services. All three areas have been seeing healthy as enterprises up their security IT spend in response to well-publicized data breaches. With Symantec's enterprise security revenue down 13% Y/Y in calendar Q2 in spite of strong IT security spending, M&A could provide the company's product line with a needed shot in the arm.
- In addition to M&A, Brown promises Symantec will spend heavily on R&D to improve its competitiveness: 6-12 organically developed new products will launch between now and the end of March.
Aug. 11, 2015, 2:55 AM
- Symantec (NASDAQ:SYMC) plans to sell its data storage business Veritas to Carlyle Group (NASDAQ:CG) under a deal set to be announced this afternoon, when the former reports its quarterly results.
- Carlyle would pay on the high side of a range between $7B-$8B. At that price, the deal would be this year's largest private equity takeover of a tech company.
Jul. 7, 2015, 6:41 PM
- Bloomberg reports Symantec (NASDAQ:SYMC) is "nearing a deal" to sell its Veritas storage software unit (currently set to be spun off) to P-E firm Carlyle (NASDAQ:CG) for $7B-$8B. For reference, Symantec closed today with a $15.4B market cap.
- Deal terms are still being negotiated. Symantec hasn't been shy about its willingness to field offers for Veritas, which was acquired for $13B+ in 2005. Reuters reported in April tax concerns had hurt buyout interest.
- Symantec has risen to $23.40 AH. The company's Information Management ops had FY15 (ended in March) revenue of $2.56B (+1% Y/Y).
Apr. 13, 2015, 2:44 PM
- After surging before the close on Friday thanks to a WSJ report stating the company is exploring a sale of its Veritas storage software unit that (in the opinion of a source) could fetch more than $8B, Symantec (NASDAQ:SYMC) is now barely above its Thursday close.
- Likely playing a role: Reuters has followed up by reporting Symantec has been seeking buyers for Veritas, if not for the entire company, for months, and that "interest from potential buyers has been limited because of a tax burden associated with splitting the company." Symantec is said to have reached out to EMC, NetApp, and P-E firms.
- Analysts like the idea of a Veritas sale. Cowen: "Timing aside, we do believe that suitable buyers exist, with Oracle, NetApp, and EMC, the most likely strategic bidders, but PE also very possible ... Given Veritas’ low growth profile and tough competition, we believe this would be a good exit for SYMC..."
- Sterne Agee: "Both EMC and and NetApp have likely been afforded the opportunity to consider this acquisition before – we would be surprised if either vendor were to actively pursue this M&A."
- Jefferies: "We very roughly assume a $3bn tax basis and 40% tax on any gain on the sale of Veritas, which translates to $2bn in tax leakage on an $8bn transaction." The firm only values Veritas at $5B, but admits "low interest rates and high degrees of financial leverage present upside risk to our valuation."
- Meanwhile, a Piper Q1 security reseller survey found 38% stating their Symantec sales are below plan vs. 13% above plan. Moreover, for Q2, Symantec is said to have "the weakest [sales] pipeline of all vendors, with 50 percent of resellers expecting below normal seasonality."
Apr. 10, 2015, 4:01 PM
- The WSJ reports Symantec (NASDAQ:SYMC) is exploring a sale of its storage software unit. The business, once more known as Veritas, is set to be spun off by year's end.
- P-E firms and "possible industry bidders" have reportedly been contacted. One source states "potential buyers approached Symantec about Veritas before it began contacting possible bidders" while adding the business could fetch more than $8B; Symantec currently sports a $17.2B market cap. Taxes related to a sale are seen as a potential roadblock.
- Symantec, whose storage software ops saw revenue rise only 1% Y/Y in FQ3 amid tough competition, has shot higher on the report. The company's analyst day arrives on April 17, and its FQ4 report on May 14.
Jan. 13, 2015, 12:38 AM
- Symantec (NASDAQ:SYMC) is hiring 65 engineers and data scientists, and is licensing IP, from Boeing's (NYSE:BA) Narus cybersecurity analytics software unit. Terms are undisclosed.
- Narus' technology relies on algorithms and data fusion techniques to analyze large volumes of Web traffic, and filter suspect material. The company was the subject of a 2006 class-action suit alleging AT&T used its products to support the NSA's warrantless wiretap program.
- The purchase comes as corporate interest in cybersecurity continues to surge in response to high-profile breaches - Pres. Obama will outline his cybersecurity proposals later this week - and as Symantec tries to better compete against a slew of smaller, faster-growing security tech firms offering some mixture of hardware, software, and services to protect against external threats.