Will Symantec re-emerge as strong security vendor?

Symantec HQ US
Symantec will end a string of eight quarters of revenue declines in Q3 2016 with the addition of Blue Coat’s portfolio and leadership, says Jane Wright, principal analyst at TBR.

Symantec’s revenue has been in decline since 3Q14, and Q2 2016 was no exception with the security vendor’s revenue falling 3 percent  to $884 million. Symantec’s enterprise security revenues, which contributed 54 percent of Symantec’s Q2 2016 revenue, were approximately flat at -0.2 percent, slightly better than expected in the vendor’s guidance as more customers adopted Symantec’s relatively new Advanced Threat Protection (ATP) solution.

Symantec’s consumer security revenue declined 6 percent, although Symantec is adding new WiFi and home IoT security options to maintain its presence in the consumer security market. Despite revenue declines, Symantec’s recent cost cutting initiatives resulted in the vendor’s operating profit rising 28 percent to 12 percent of revenue.

TBR anticipates that these initiatives, coupled with the addition of Blue Coat’s portfolio that will extend Symantec’s web and cloud security offerings, will result in operating margin improvements later in 2016 and enable Symantec to re-emerge as a stronger pure-play security vendor by 2018.

Symantec’s acquisition of Blue Coat holds the promise of a more modernized portfolio and stronger growth

Over the past three years, Symantec has endured many cost-cutting measures, including layoffs and infrastructure consolidation. The revolving CEO position, coupled with headcount consolidation, led to inconsistent strategies that also negatively impacted Symantec’s performance. However, Symantec set its course on a new path with its August acquisition of Blue Coat for $4.65 billion.

The joining of Blue Coat and Symantec will solve many of Symantec’s existing portfolio and delivery problems. It will also introduce new leadership that TBR believes will bring more effective growth strategies to Symantec, as Greg Clark, CEO of Blue Coat, becomes Symantec’s new CEO and Michael Fey, Blue Coat’s president and COO, becomes Symantec’s new President and COO.

While Symantec has many new technologies, such as its ATP suite, most of Symantec’s offerings including its widely deployed Symantec Endpoint Protection (SEP) are based on traditional security technologies, and therefore, the majority of its revenue comes from more traditional solutions. But the addition of Blue Coat will expand Symantec’s portfolio with newer technologies in areas such as web security, analytics, and cloud security including cloud access security brokerage (CASB).

Further, many of Symantec’s current solutions are delivered through traditional methods such as on-premises software licenses. Blue Coat brings newer delivery capabilities and more progressive solution packaging methods, such as security-as-a-service (SECaaS), which will enable Symantec to meet customer demand for more flexible security technology consumption.

The addition of Blue Coat solutions and customer base will provide an immediate, albeit inorganic, revenue increase. During the coming year, TBR expects the two vendors to move quickly to rationalize and integrate their portfolios and operations, and over time combine their sales and channel resources to earn larger deals that include Symantec and Blue Coat technologies. TBR expects Symantec’s updated portfolio and newer delivery methods will help Symantec generate strong organic growth and reemerge as one of the dominant vendors in security market by 2018.

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