We did start the post on SYMC yesterday by stating we had no idea what the quarterly report would hold.Â Investors were happy with posted results and guidance.Â Â From our perspective it only makes the potential downside more acute if they company does nothing to improve their steady performance decline in customer environments.Â Even though we don’t play for the quarterly reports we still focus on them to compare and contrast them with our longer-term thesis.
The company started the report by reclassifying a large number of business segments to present a different view of the business to the market.Â (Why would you do this in a fiscal Q4 versus at the beginning of the next fiscal year?)Â In any case we’ve lived in company environments like Symantec where “results” often depend more on presentation than execution.Â This was the case at IBM during the years they tried to ignore the substantial declines in their business in the twilight of the 80’s.
The full transcript is available here to skim. As one can see lots of the statements and answers are either obscure or self-serving.Â There are plenty of references to “double-digit” growth and “our <fill in the blank> business is doing great” along with repeated references to the “record” quarter.Â Management even gets away with a revisionist positioning of saying they have now posted five straight quarters of stronger than expected results despite lowing guidance with the September 2007 quarter.
Clearly international was strong for the company.Â We were more than a bit surprised that nobody had much of a reaction to the fact that 6 points of the 13% YoY growth was driven by foreign exchange.Â Unless we misunderstood the statement it appears that the entire growth in deferred revenue came from currency effects.Â Leading analysts actually said that the growth in deferred revenue was strong.Â Are they even listening to the information being presented?
That said we don’t find fault with the report per se.Â The company has a strong mix of businesses and recent acquisitions like Vontu are indeed best-of-breed point products.Â Â At the same time nothing has changed in terms of our thesis on the company and the stock.Â Management will be driving the field force to deliver more growth in license revenue this year at a time that existing customers are increasingly dissatisfied with Symantec and expect very little to no spending increases with them.Â It could be a very interesting year for the company and investors.Â To the degree that international business and currency benefits remain strong, the fundamental weakness will be masked.
Based on the quarter and the guidance we would expect the presentations on the analyst and investor day on June 12th to be another powerful marketing event which will help stoke enthusiasm for what looks like a turnaround.
We main focused on execution which we continue to see as bad enough to jeopardize business results in the next few quarters. Management closed their call stating that F09 is going to be “their year.”
— Kris Tuttle