Symantec 1st-Quarter Net Down 9.9% on Costs; CEO Enrique Salem Steps Down
07/25/2012| 08:05am US/Eastern
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By Saabira Chaudhuri
Symantec Corp.'s (>> Symantec Corporation) fiscal first-quarter profit dropped 9.9% as the maker of security software saw higher costs that offset a slight rise in revenue, and the company also disclosed Chief Executive Enrique Salem has stepped down effective immediately and will be replaced by Chairman Steve Bennett.
"While progress has been made over the last three years in many areas, it was the board's judgment that it was in the best interests of Symantec to make a change in the CEO," Mr. Bennett said. He added he believes Symantec's assets are strong and the company is underperforming. The company said the CEO change isn't based on any particular event.
Symantec, which provides its trademark Norton security products for personal computers, has struggled as it looked to shift its business model to one based on regularly occurring subscription revenue and away from one-time license sales.
Selling software as a service by subscription--as Symantec is trying to do more--entitles customers to access software online and allows them to pay monthly or annually for a service they receive daily. For the software makers, the subscriber model provides recurring revenue and the opportunity to sell additional features. However, the accounting transition from the conventional license model, in which users pay a one-time fee for the software, has proven challenging.
Mr. Bennett will continue in his role as chairman. He first joined Symantec's board in February 2010 and became chairman in 2011. Bennett previously served as chief executive for Intuit Inc. (>> Intuit Inc.) from 2000 to 2007.
Meanwhile, Symantec said it expects revenue for the current quarter between $1.64 billion and $1.67 billion and adjusted earnings per share of 35 cents to 39 cents. Analysts polled by Thomson Reuters recently expected revenue of $1.69 billion and 40 cents in per-share earnings.
For the period ended June 29, Symantec posted a profit of $172 million, or 24 cents a share, down from $191 million, or 25 cents a share, a year earlier. Revenue edged up 0.9% to $1.67 billion.
In May, the company had predicted per-share earnings of 37 cents to 38 cents on revenue between $1.65 billion and $1.66 billion.
Gross margin narrowed to 83% from 84.3%.
For the quarter, Symantec's consumer segment represented 31% of total revenue and decreased 1% from the year ago period. The security and compliance segment represented 30% of total revenue and increased 7% from a year ago. The storage and server management segment represented 35% of total revenue and decreased 2% from a year ago.
Of late, Symantec has focused on putting more feet on the street as part of a sales reorganization. The company is shifting staff from support to sales roles and consolidating sales teams. It has said it is tilting incentives for people handling large accounts toward selling new licenses and subscriptions and away from renewals, and it will automate more retail customer sales and service on the Web, and away from "voice to voice communication."
Shares rose 2.9% to $13.56 in premarket trading.
Write Saabira Chaudhuri at saabira.chaudhuri@dowjones.com
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