Listen to this article
Symantec pre-announced weak revenues and earnings for the second consecutive quarter Tuesday, again denting hopes on Wall Street that the world’s biggest computer security company would finally overcome the lingering problems from its acquisition of Veritas.
Shares in the company fell by 9 per cent, wiping $1.5bn from its stock market value, after it warned of disappointing results from its data centre management division, which accounts for around a quarter of overall revenues.
It also blamed higher costs resulting from an overhaul of its back-office systems and deeper business processes stemming from the Veritas deal.
The latest disappointment also prompted Symantec to offer a more conservative financial outlook for the rest of its fiscal year, which ends in March, reversing a decision three months ago to leave its forecasts intact.
Referring to its work for the large multinational companies that make up the bulk of the data centre management business, John Thompson, chief executive, said: “We think it’s prudent to dial back our expectations on some of those contracts.”
He added that the company would announce cost-cutting moves when it reports its full earnings next week, to counter the pressure on profit margins due to weaker revenue growth and escalating costs.
Symantec’s shortfall follows similar weakness from other big software companies, including SAP and Oracle. However, Mr Thompson said he did not believe this pointed to a broader slowdown in demand from big customers of IT companies.
“I don’t think there is a macro challenge,” he said, adding: “Those of us with a large installed base are certainly being challenged at renewal time for a reduction in spending.”
He blamed the revenue weakness on the fact that big customers had bought fewer new software licences when renewing their contracts.