Data security services provider Symantec Corp. (NASDAQ: SYMC) dropped by nearly 7% on Thursday following the resignation of CEO Michael Brown and a cut to its fiscal fourth-quarter forecast. The resignation was something of a surprise, but the cuts to both revenue and earnings guidance probably were not.
Brown served as Symantec’s chief executive for about a year and a half, and his primary role was to complete the sale of the company’s Veritas software division. He managed to do that, but Symantec had to accept a lower price than it wanted and the company ended up with $7.4 billion for a business it paid $10.5 billion to acquire in 2005. Basically, Brown’s work for Symantec was finished with the sale of Veritas.
As for the trimmed outlook, sales of the company’s anti-virus software has stagnated and the company is trying to make the shift to a cloud-based business. The transition has been anything but smooth and, as UBS analyst Brent Thill told The Wall Street Journal:
Symantec can’t grow, and they’re in the hottest space of IT spend. Either [the] sales force doesn’t know what it’s doing, or your products are not very good, or it’s a combination of both.
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The company reduced its revenue forecast to $873 million from a prior range of $885 million to $915 million. The earnings per share forecast was cut to $0.22 from a prior range of $0.24 to $0.27.
Analysts’ reactions came quickly:
- Baird cut its price target from $24 to $21 but kept its Neutral rating.
- Cowen dropped its price target from $22.50 to $19.50, with a Market Perform rating.
- Goldman Sachs lowered its price target from $20 to $19 and has a Neutral rating.
- Jefferies cut its price target from $22 to $17 and rates the stock a Hold.
After Thursday’s sharp drop, shares traded down about 1.3% on Friday morning, at $16.63 in a 52-week range of $16.14 to $26.16. The consensus price target on the stock is $20.26, but that number is unlikely to include recent changes.
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