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June 9, 2010
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Leading Internet security solutions provider Symantec Corp. (SYMC) recently disclosed that it has concluded the acquisitions of two privately held companies, namely GuardianEdge and PGP Corp. Symantec spent around $370 million on the acquisitions that were first announced on April 29.
PGP Corp. and GuardianEdge Technologies generated revenues of $75.0 million and $18.0 million, respectively for the quarter ended Mar 31, 2010. The company expects the acquisitions to help it better serve its end customers by bringing in standards-based encryption capabilities across many devices such as smartphones, full disk, email, file, folder and removable media devices.
We believe this will enable the company to cater to the entire IT security segment, increasing its customer base and helping it retain its leading market share.
Historically, Symantec has always grown through business diversification and acquisitions. In May 2010, the company agreed to buy the authentication service unit of VeriSign Inc. (VRSN) for a lump sum value of $1.3 billion. The acquisition would increase access to the credit card encryption security business.
As a result of increasing credit card frauds reported across the globe, all major credit card issuers are using credit card information encryption technology to safeguard the interest of customers. This has resulted in the expansion of the market for this technology.
Symantec has made quite a few acquisitions over the past few years, which include Altiris, a leading provider of service-oriented management software in April 2007, and MessageLabs, the leader in online messaging security in November 2008. We expect the company to resort to further acquisitions, as it rounds out its portfolio and enters new areas.
Symantec delivered decent fourth quarter results, exceeding the Zacks Consensus estimate by 7 cents. The strong product portfolio, growth prospects in all its served markets, acquisitions, customer win momentum and solid cash flow are positives.
On the other hand, we are a bit concerned about the intense competition that the company faces from big and small players, as well as hardware and software manufacturers entering the IT security business. This apart, the company’s high debt balance and enhanced level of security offered by new versions of Microsoft’s (MSFT) Windows operating system also pose some challenges.
We maintain a Neutral rating on Symantec shares.
Read the full analyst report on "SYMC"
Read the full analyst report on "VRSN"
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