There feels like there is a disconnect between all the activity and disruption in the information security sector and Symantec which has been quietly sitting on the sidelines. $SYMC shares have been trending steadily down for the last seven years.
But information security and storage have been red hot the last year or two. Even the IPO market is welcoming for InfoSec companies. Imperva ($IMPV) was a huge success and AVG $AVG did okay. Now we have ProofPoint, Palo Alto Networks and Splunk on the way.
It’d be one thing if SYMC was innovating and coming out with new products to take advantage of the growth in mobile device security, network security management, and authentication – but they haven’t.
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So where is the M&A? They’ve done very little. Even the recent purchase was tiny and basically amounts to an enterprise mobile app store. Useful but hardly compelling.
The consensus around the enterprise IT market is that the company is coasting and might be galvanized into action if they were split up, either by an acquiring PE firm or simply dividing the company into one focused on storage and the other on security.
We’ve reviewed management presentations from the last year and it’s quite clear that senior management is merely going through the motions of running the company. For example the first few hours of their last analyst day were almost completely devoid of information and the slides contained only platitudes.
The company will be again putting on their analyst day in May in San Francisco. The stock is very near where it was last year at this time. Our guess is that it will trend up through earnings (May 2nd) and into the meeting (May 24th) in anticipation of some positive news or developments.
However the company needs to *do* something and it’s not clear that the current management team has this in mind. The company is losing share in terms of enterprise IT in general and even in their chosen segments in particular.
There is potential though. If Symantec could innovate/execute/acquire their way to an improved position their current IV of $23 could expand substantially to $30. The current price of $18-19 makes it possible for someone to “do a deal” and unlock some value in this name.
The big question is “Is SYMC management dusting off the slides and presentations from last year to run through again with a few tweaks or are they taking out a clean sheet of paper?”
For reference here is our IV model based on the steady state of the company: