Tepid Guidance, Investigation Eclipse Symantec Earnings

In terms of the audit investigation, limited disclosure was given in the press release and management did little to quell concerns on the earnings call. It was initially indicated that the investigation is in connection with concerns raised by a former employee and that the Audit Committee of the Board of Directors has sought independent counsel and contacted the SEC that the investigation was proceeding. In addition to the press release, management indicated that the investigation will delay the release of the firm’s 10-K. We will be closely tracking any news of the investigation over the coming weeks to see if it materially impacts our long-term thesis.

In terms of the earnings, we were impressed by the robustness in the Consumer segment, arguably aided by the acquisition of LifeLock, and we would hypothesize that LifeLock benefitted from the Equifax scandal. In terms of Enterprise, the results this quarter and guidance for the next year were modestly below expectations. The assets acquired through the Blue Coat acquisitions are largely low-margin but expected to be high growth. However, enterprise revenue declined 7% for the quarter, although this was impacted by the Web Security and PKI divesture to Digicert.

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