Is New Symantec CEO Steve Bennett Worth $1.5 Billion? Not a Chance


The somewhat surprising July 25 announcement that Enrique Salim's three-year tenure as Symantec (NAS: SYMC) CEO had ended -- and the reign of Chairman Steve Bennett had begun -- put the lead change front and center. And that was on top of Symantec's fiscal Q1 earnings announcement. Trading volume nearly five times the norm and a 13% jump in share price were proof that the news captured the attention of investors. But what's really changed to warrant a $1.5 billion (give or take) increase in company value?

Quarterly results
Though not necessarily bad, Symantec's earnings certainly don't warrant a double-digit jump in share price and the subsequent $11 billion market cap. Revenue was essentially flat year over year (up 0.9%) and down sequentially from last quarter. Operating income was lower than the same quarter last year, as were earnings and virtually every financial measure worth reviewing.

Profit margin dropped to a shade over 10%, and both return on assets and return on equity were nearly half what they were in Q1 of 2011. But three things worked in Symantec's favor: operating margins didn't drop (flat by comparison), the $0.43 a share earned during the quarter beat analyst expectations by $0.05, and the aforementioned change in leadership was apparently viewed as a godsend.

The reality
Symantec stock has meandered from highs of $22 a share to lows around $11 (and all points in between) for much of the past five years or more. Some investors go even further back and (still) blame the $13.5 billion Veritas purchase in 2004 for the aimless meandering of the stock. Whatever the reason, the board and Steve Bennett had enough and determined the time for change was now. Apparently, so did investors.

But this is where things get sticky. Symantec continues to lose market share in its bread-and-butter market: antivirus software. The decline in PC sales around the globe and increased competition from the likes of Microsoft (NAS: MSFT) and CA (NAS: CA) are wreaking havoc on Symantec's global and domestic market share.

Symantec now holds 10.3% of the global vendor antivirus market, down from 10.6% the beginning of 2012. Not huge, but in comparison, Microsoft's Security Essentials jumped 1.8% to 13.2%. Though Intel's (NAS: INTC) McAfee acquisition has yet to make a real dent either domestically or internationally, it shouldn't be counted out just yet. And unfortunately for Symantec shareholders, the story is even worse here at home.

Though Symantec remains in second place in market share behind Microsoft, it's moving in the wrong direction while the other key players are improving. Microsoft had the biggest gain the first six months of 2012, jumping nearly 6% and now is the security provider of choice, with a 22% domestic market share. The second-biggest jump? CA's Total Defense has become a presence, and a menacing one for Symantec, gaining 4.7% market share in the U.S. in just two quarters.

The Steve Bennett effect
So what does Bennett bring to the Symantec CEO table, beyond his chairman duties? Certainly a great deal of experience. With 35 years of business background, much of which came at the CEO breeding ground that is GE, his resume is an impressive one. If nothing else, you can take heart in knowing senior management recognizes the need for the proverbial swift kick. Some folks are obviously hoping Steve will increase shareholder value by selling off assets, but his answer to that is a definitive "I'll get back to you."

One of his first steps was to politely ask folks to back off and give him three to four months for a "listening and learning" tour before making any major decisions. In answer to grumblings about selling assets, he was quoted as saying, "I wasn't brought in to sell the company." Of course, that doesn't mean eventually divesting Symantec of the Veritas business or the core antivirus unit is out of the question.

Not jumping into any rash decisions makes sense -- it'd be unwise to do anything else, regardless of background or experience. But betting on new leadership to change what has been a long (really, really long), ongoing story of mediocrity quickly -- whether by asset sales or strategic business changes -- just doesn't make sense.

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