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Wednesday, February 01, 2006

The Good, The Bad (GOOG v. SYMC)

So, the GOOG after-hours trade worked well. Unfortunately, Symantec is nothing but ugliness. Their report wasn't horrible. They missed guidance by a bit, but it's not like they have an extremely high valuation. No, I think they got hurt the most by YACD (Yet Another C-level Departure).
Their valuation remains compelling in my bloodshot, weary eyes. They estimate $5.5 billion in revenues in 2007 with a $1.14 in earnings, resulting in forward enterprise valuaton multiple of less than 3x revenues and 15x earnings (non-GAAP). It looks really cheap! Right?
Well, the big threat comes from Microsoft's impending free anti-virus offering. And buying Symantec now is a basically a bet that one or some combination of the following will occur:
  1. Microsoft will continue to delay their AV offering.
  2. Microsoft's AV solution will not be trusted by consumers and they will continue to consume Symantec's AV products.
  3. Symantec will accelerate its enterprise security offerings enough to counteract the drop in AV revenues because of Microsoft.
I make my money by betting against the popular wisdom. I believe that somehow, someway Symantec will navigate this transition and protect more revenues from Microsoft than the market believes.
But now there's another threat that has me worried: What the hell is up with all of the C-level departures at Symantec?!?
Tonight, it was announced that Symantec's CIO is going to be replaced; meaning that the existing CIO is gone. Last week, it was announced that Gary Bloom, the President installed during the Veritas merger, was leaving. This after the CFO Greg Myers departed in November of last year and John Schwarz, the COO a few months before that to be CEO of Business Objects. This many departures is usually a signal that all is not well. Either John Thompson is doing one hell of a house cleaning, or his team is running for the exits...
Unfortunately, I read the signs too late on this one. There are safer bets for my money in the market.
Like picking up Google in After-Hours and getting a nice 8% return in one day!

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