Dear Mr. Hill,
I write to you out of concern for the unsubstantiated rumors that the consumer portion of Symantec (SYMC) will be sold to private equity once the enterprise division is sold to Broadcom (AVGO). I wrote enthusiastically about the sale previously: Symantec Sells Enterprise Business. We Are Witnessing The Birth Of LifeLock.
Selling the enterprise portion of Symantec was a masterstroke, and I applaud this move. It unleashes value by jettisoning a "me too" enterprise business and exposes a unique consumer service, with the ability to scale enormously. I assume that you intend to keep your promise of the special dividend of $12 a share, but the investor deserves to receive the full value of this new strategy. I know that it is difficult to restructure a public company while the business is in transition, but the value proposition of LifeLock is so unique that I think shareholders will reward your valuation once they fully understand the direction you are going in.
I know the standard response to this type of inquiry is no response, but perhaps you could share with our readers what your strategy will be going forward. We can set the issue of whether or not you are selling the consumer portion of Symantec to PE aside for now. There is tremendous potential for Symantec once it changes its branding to LifeLock, let's face it, that is obviously going to be your first and best move. Here are some strategies I think will make the new LifeLock Corporation a huge success:
- Rebranding Symantec consumer to LifeLock. This rebranding alone can boost the share price substantially.
- Change your go-to-market from a feature-based service to insurance. Consumers understand insurance. The features offered by LifeLock are extremely utile and important, but can't all be absorbed in a 60-second spot. Instead, focus on protection after-the-fact and insurance benefits.
- Adopt a more engaging marketing style a la GEICO or Progressive Corp. (PGR).
- Become the champion for identity and credit history for the consumer. When Target (TGT), Equifax, or Capital One (COF) is hacked and people's credit card info is exposed, LifeLock can speak for them by filing "friend of the court" briefs and other activist actions. Positioning LifeLock as the champion of ID protection will create a hugely powerful consumer brand.
I understand that the last bullet is unconventional, but activist style CEOs can really boost the value of their companies. Two examples come to mind; the first is the CEO of T-Mobile (NASDAQ:TMUS) John Legere. While cell phone service is more of a generic service, Legere's approach, while dramatic, was to position himself as a consumer advocate with T-Mobile as consumer-first. His combative style changed T-Mobile from an also-ran to a real competitor for the two incumbent cell providers.
My other great example is Tim Cook and his outspoken support for privacy for their consumers. Tim's target is Facebook (FB) and Alphabet (GOOGL) (NASDAQ:GOOG), but no one is going after the real culprits in my mind like the Equifaxes of the world who have no allegiance to the consumer or legal responsibility either. One could argue that Apple (AAPL) does not need any help in bolstering its popularity by being seen as a consumer advocate, but it is obvious that AAPL's stock benefited from Mr. Cook's position.
With the proper marketing, I see no reason why LifeLock positioned as an insurance purchase for consumers couldn't achieve the valuation of a Progressive which is two and a half times as large as your current capitalization BEFORE the sale of the enterprise division of Symantec to Broadcom. Don't sell the LifeLock business to private equity before market participants fully value the tremendous potential of this consumer insurance opportunity. LifeLock's penetration is still minuscule, the Equifax hack exposed 147 million people in the US alone. DON'T SELL.
Note: The above letter was sent to Richard Hill's corporate email address. I have no idea if he will respond or if he will even see it. The purpose of the letter is to once again point out the enormous opportunity the new LifeLock company represents and also to (perhaps in vain) nip a sale like this in the bud. I know this is unsubstantiated chatter, but the board of Symantec has a duty to shareholders and I want them to give due consideration to the true value of Symantec.
Looking to Next Week...
Farfetch (FTCH) is a member of my "New eRetailers" list. It was unduly punished after what I think was a good earnings report, yet sold off anyway. Many newly IPO companies, in fact, many fast-growing tech-oriented companies in general sell-off after their earnings report, so much so that I generally advise lightening up or hedging a name before earnings. FTCH has had a jump in call options volume. I suspect that this means many fast money traders believe that FTCH should regain some value sharply and soon. If you are a fast money trader, I want to reiterate a buy on FTCH too, otherwise, accumulate FTCH.
Cloudera (CLDR) Mea Culpa. I had been meaning to highlight CLDR once Carl Icahn bought into the company about a month ago. In my experience, when Icahn buys a big piece of a company (18%), and installs 2 operatives on the board, he is probably looking to sell or merge the company and boost the value. CLDR is the result of the merger of two tech companies, Cloudera and Hortonworks. As is often the case in a technology merger of equals, things get off to a rocky start and CLDR's value nosedived. The opportunity to jump on this news fell through my fingers, but there is still time to benefit. CLDR has righted the ship with a really positive earnings report. The company's quarterly revenue was up 78.3% on a year-over-year basis. I think CLDR can go way higher. Start a long position in CLDR.
D.R. Horton (DHI): Barron's wrote positively about DHI this weekend. DHI is on my homebuilder's list, and I favor it because they have an entry-level home division. I don't use Barron's as an "idea generator", but I do like it as a confirmation. DHI is at its all-time-high, but the chart looks fantastic and I would not be surprised if it breaks out from here going into the Fed meeting. It is more or less accepted that Powell will lower interest rates again and that is seen as a strong positive for housing. Continue to be long DHI.
DocuSign (DOCU) had a fantastic earnings report. The company's quarterly revenue was up 41.0% on a year-over-year basis to $235 million. I saw an interview of the CEO on CNBC and was very impressed with their strategy going forward. They intend to make company-to-company agreements more efficient, via their cloud-based service. It might seem like a small thing, but managing contract signatures and agreements is an area that really can benefit from cloud-tech productivity. Even internal sign-offs can be so inefficient and could stand a move away from paper and pen signatures. Also, the unique structure of their customer base which goes from tiny one-person entities to global corporations is compelling. I don't feel comfortable recommending a company that just shot up 21% on 10 times volume, so let's just keep an eye on this baby. If I am right and volatility has not been repealed, maybe there will be some profit-taking that we can take advantage of.
Zoom Video Communications (ZM): Holy cow! The company's quarterly revenue was up 95.7% on a year-over-year basis. Now that is zooming. Unfortunately, the stock dropped 7.85% on the news and is now more than 20% below its all-time high. This qualifies ZM to be accumulated right at this current level. ZM could continue to fall so start small and add to it over time. I suspect that the market will sell off later in the month, not so much for the Fed meeting but the initial trade talks that are supposed to take place mid-month as well.
Overall, the market should move higher
I say this with the caveat of any impertinent tweets, Iran nuclear saber-rattling, calamity in Kashmir, and impeachment nonsense. Momentum has been firmly set to the upside so that even this past Friday, which should have sold off, closed mildly positively. I want you to take my admonishment to trim positions seriously. Best to take profits when the market is going up than in a panic when the market is going down.
You should be working towards building a 25% to 35% cash position. If you do any buying, please make sure to sell more than you need for purchase to grow your cash. I also hope that you looked into hedging. I expect the VIX to fall to 13-ish this week and that makes options quite reasonable. Time to think about writing covered calls and other hedging activities.
Enjoy the remainder of your weekend and have a great week...
Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in SYMC over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.