We're Less Secure About Symantec's Strategy
A lack of leadership raises the risk profile for this IT security and storage provider.
Symantec (SYMC) announced Thursday that Steve Bennett has left the company. Bennett, who had been CEO since July 2012, implemented a number of organizational changes in order to improve the company's fortunes. However, the board did not believe the company was moving aggressively enough to capture the growth opportunities in the IT security and management industries. As a result, it appointed board member Michael Brown as interim president and CEO while it conducts a search for a CEO with public company experience.
With Symantec in the midst of a number of transformational initiatives, we think this announcement is disruptive and leaves the company without much-needed leadership. We appreciate that the board wants to see faster results, but worry about the time required to establish a new CEO and the impact it may have on employee morale and public perception. We are raising our fair value uncertainty rating to high from medium, as we think this announcement puts a cloud over the company's strategic future and we expect near-term volatility. Nevertheless, the firm reiterated its fourth-quarter forecast, and we believe it can achieve our modest long-term financial targets (normalized revenue compound annual growth rate of 3%-4% and 30% non-GAAP operating margins in fiscal 2017). Therefore, we retain our $25 fair value estimate at this time.
Andrew Lange does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.