The resignation of Symantec vice-chairman and president Gary Bloom is apparently one reason why the shares of the security-software developer are down some 5% today. At below $18, Symantec (symbol SYMC) is not far from its 52-week low.
Bloom was top man at Veritas when it was acquired by Symantec in 2005. Today's share-price decline implies that his talents are worth close to $1 billion (the loss in market value since news of his departure broke). However, since Bloom wasn't in charge -- John Thompson is chairman and CEO -- and won't be replaced, it's hard to see why his exit should be this harmful to the stock or to the outlook for Symantec. Several analysts note that Symantec, which makes Norton antivirus software and sells a host of other computer-security products and services, is also searching for a chief financial officer. That would seem to be a bigger need.
This isn't the first time that Symantec shareholders have experienced motion sickness. In the summer and fall of 2005, the stock rallied from $18 to $24 before a profit warning in November sent it plunging below $20. But some analysts say that investors have overreacted and that Symantec's shares will likely recover. Prudential's Michael Turtis cites Symantec's strong security and data-storage-management businesses in saying to "overweight" the stock (that's a positive rating). Sarah Friar of Goldman Sachs says that Symantec operates in a good industry and that its arch-competitor, McAfee, has bigger problems. Indeed, McAfee's shares (symbol MFE) are off a whopping 15% today after the company issued a profit warning. That's likely another reason for the drop in Symantec. Friar, incidentally, rates Symantec's shares "outperform."
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Symantec is a profitable company with low debt and fair growth prospects. At close to $18, the stock sells at 18 times the $1 per share that analysts, on average, expect the company to earn in the four quarters ending March 2006, and 15 times estimates of $1.15 per share for the year ending March 2007.
Because Symantec has some of the best products in a vital and fast-growing part of the tech sector, the stock is capable of another vigorous rally. Just be prepared for more volatility between now and January 31, when Symantec is next scheduled to report quarterly earnings.
--Jeffrey R. Kosnett
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