Symantec Tops, Revs Down

Symantec Corp. (SYMC - Analyst Report) reported fiscal second-quarter earnings per share of 36 cents, exceeding the Zacks Consensus Estimate of 29 cents.
 
Revenues
 
Symantec reported second-quarter GAAP net revenues of $1.47 billion, down 3% from $1.51 billion reported in the year-ago quarter. Non-GAAP revenues for the quarter were $1.48 billion, down 3% from $1.52 billion reported in the year-ago quarter. The revenue decline can be mainly attributed to a decline in Licenses revenue.
 
Coming to revenue segments, Content, subscription and maintenance revenues for the quarter was $1.25 billion, up 6.2% from $1.18 billion reported in the year-ago quarter. Licenses revenues for the quarter was $220 million, down 34.7% from the year-ago quarter. This substantial decline in license sales occurred as a result of customers limiting their purchases of licenses to current needs, setting aside purchases for future needs. In addition, server market deceleration has negatively affected the license sale business, particularly in new license sales on the Sun platform.
 
Operating Results
 
Gross margin on a GAAP basis was 82.4% for the second quarter, up from 79.6% reported in the year ago quarter. Excluding special items, the non-GAAP gross margin for the quarter was 85.9%, up from 85.7% reported in the year-ago period. Gross margin increased as total cost of revenues decreased at a higher rate than total revenues. Operating margin on a GAAP basis was 17.4% for the second quarter, compared with 14.3% for the same quarter last year. Excluding special items, Non-GAAP operating margin for the second quarter was 29.2%, flat year-over-year.
 
Net income on a GAAP basis for the fiscal second quarter was $150 million, compared with $126 million for the same quarter last year. This resulted in GAAP earnings per share of 18 cents, compared to earnings per share of 15 cents for the same quarter last year. Excluding special items, non-GAAP net income for the fiscal second quarter was $294 million, compared to $312 million reported in the year ago quarter, resulting in a non-GAAP earnings per share of 36 cents, compared with earnings per share of 37 cents in the year-ago quarter.
 
Balance Sheet & Cash Flow
 
The company generated cash flow from operating activities of $226 million in the second quarter of fiscal 2010 and spent around $120 million to repurchase 7.9 million shares at an average price of $15.22. The Board of Directors has approved the repurchase of another $1 billion of shares. Symantec ended the quarter with cash, cash equivalents and short-term investments of $2.33 billion. The company does not have any long term debt. Days sales Outstanding (DSO) at the end of the quarter was 42 days.
 
Guidance
 
For the third quarter, GAAP revenues are estimated between $1.484 billion and $1.514 billion. GAAP earnings per share is estimated between 23 cents and 24 cents. The company expects GAAP deferred revenues in the range of $2.998 billion and $3.048 billion. On a non-GAAP basis, the company expects third-quarter revenues in the range of $1.485 billion to $1.515 billion. Non-GAAP earnings per share is estimated between 36 cents and 37 cents, while non-GAAP deferred revenues are expected to be in the range of $3 billion to $3.050 billion.

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