Symantec’s Synergy in Cybersecurity

Symantec Corp (NASDAQ: SYMC), the Mountain View, CA-based software maker that sells the widely used Norton Antivirus products, is one of just a handful of tech companies in the Fortune 500. The company has experienced its ups and downs over the last two years, but the turnaround strategy of its new chief executive officer is starting to pay off.

Symantec is the commanding leader in the consumer security market. The company’s market share is about twice the size of Intel’s (NASDAQ: INTC) McAfee software, and the McAfee brand name was not helped when its developer was temporarily a fugitive from justice in Central America last year.

Protecting personal and corporate data from unauthorized access by hackers is a booming field, as my colleague John Persinos explains in his April 5 article in Personal Finance, “The Spoils of Cyberwar.” The recent scandal over NSA snooping only heightens concerns over the problem.

Symantec also competes in the antivirus industry against such companies as Kaspersky and Norman Safeground, among others, but the Norton product is so well-established that it’s hard to see how these smaller companies could challenge it.

Symantec’s price-to-earnings (P/E) ratio is around 22, somewhat below the average for its industry. The stock is not overpriced when you consider its current market dominance and its potential for growth.

The company also has about a 30 percent share of the enterprise backup/recovery market, with a considerable lead over such competitors as EMC (NYSE: EMC) and IBM (NYSE: IBM).

The stock price suffered for a while in 2012, as many analysts complained that revenues and operating margins were treading water. During the last fiscal year, the company reported earnings per share (EPS) of $1.07, down from $1.57 in EPS in the previous year. But even when Symantec was in the doldrums, it maintained strong market shares and cash flow.

After its Norton product took off, the company may have tried to grow too quickly. For example, it paid more than $13 billion to acquire Veritas, but that hasn’t paid off in terms of higher profits. It also made plans for a substantial joint venture with a Chinese technology company, Huawei, but later dropped the idea because Symantec feared the alliance with the Chinese company would prevent it from obtaining US government classified information about cyberthreats.

A new CEO, Steve Bennett, took the reins a little more than a year ago. His strategic plan emphasizes cost reductions and an increased focus on customers, which could enhance value for investors. The cost cutting will include a reorganization of the sales force and reducing the ranks of middle management, as well as getting rid of some non-core assets.

Bennett told analysts he hopes to achieve mid-single digit revenue growth, with an operating margin of 30 percent. The current margin is 24 percent.

Mobile Devices

Symantec has long been the dominant player in protecting personal computers from viruses, and it is taking steps to maintain its position in the rapidly growing market for mobile devices.

The firm recently released the latest version of Norton Mobile Security, which provides protection for Android smartphones and tablets, iPhones and iPads. The latest updates to Norton Mobile Security for Android address privacy, a growing area of consumer concern, with new intelligence technology called Norton Mobile Insight.

Privacy risk scans powered by Norton Mobile Insight will reveal which mobile applications may put the user’s personal information at risk. The latest updates to Norton Mobile Security also extend enhanced anti-theft capabilities to iPhone and iPad with a “scream” alarm to help users quickly find their missing mobile device.

For mobile device users, maintaining control of their personal information is a major concern. A survey done by Symantec found 57 percent of app users have uninstalled or declined to install an app to protect their personal information.

To address this issue, in addition to scanning for security risks, Norton Mobile Security now scans apps for privacy risk-related attributes. For example, Norton Mobile Security will now flag an application and notify a user if a mobile app is found to export information such as a user’s contacts, photos or call logs.

“The issue of privacy is a complex and evolving one, for both consumers and developers,” said Con Mallon, senior director for product management at Symantec. “Until now, mobile app privacy scanning has been done only at the most superficial level, which doesn’t yield truly relevant and actionable information to consumers. With this latest release, we are using a unique combination of static and dynamic analysis to deliver an unprecedented view into app privacy and information leakage. With this information, consumers can actually decide for themselves whether to keep each app.”

The company also developed Norton Mobile Insight, a proprietary intelligence tool that provides analysis for every app in more than 200 app stores to determine potential security risks, privacy risks and potentially intrusive behavior.

Norton Mobile Insight has analyzed more than four million apps to date and determined that more than 30 percent of them leak data such as personal contacts or call logs. Currently, Norton Mobile Insight processes 10,000 new apps every 24 hours and to date has identified 300,000 apps as malicious.

Additionally, Symantec has acquired PasswordBank, a company based in Barcelona, Spain. PasswordBank is an independent provider of multifactor authentication, single sign-on and user management services. Symantec says it will use PasswordBank’s expertise in single sign-on technology to extend Symantec’s functionality in secure sign-on for web or cloud applications, and further enhance its identity and context aware security.

The market seems to have overreacted to some temporary setbacks Symantec has endured over the last couple of years, while overlooking its continued strength in one of the most important elements of the software business—the ability to protect your devices and your information. That makes the stock a buying opportunity.

Thomas Scarlett is an investment analyst at Personal Finance and its parent website Investing Daily.