Symantec Gets $500 Million Investment From Silver Lake -- Update
February 04 2016 - 8:23PM
Dow Jones News
By David Benoit
Private-equity firm Silver Lake is making a $500 million
investment in Symantec Corp. and taking a board seat in a bid to
boost the cybersecurity company, whose stock has flagged despite an
industry boom.
Symantec will buy back more shares, cut costs and push forward
on a transformation plan it launched in 2014.
The company plans to return $5.5 billion in capital to
shareholders through the next year using the funds from Silver Lake
as well as proceeds from the recent sale of its Veritas
data-storage and recovery business.
Meanwhile, activist hedge fund Elliott Management Corp. has
amassed a big stake in Symantec, becoming one of its largest
shareholders, according to people familiar with the matter.
Elliott, which has a long history of investing in technology
companies, supports the Silver Lake deal and the other measures
announced Thursday, the people said.
Shares of Symantec jumped 8.6% to $20.83 in after-hours trading
following the announcements.
The deal came as the company revealed a 23% drop in its
quarterly profit and 5% slide in revenue, results that met Wall
Street's expectations as the company pledged to cut costs to boost
the bottom line.
Symantec makes security software, a hot commodity in times of
rising concerns about the safety of the Internet and global
hacking. The Mountain View, Calif.-based company helped pioneer the
industry with its Norton antivirus software during the 1980s and
1990 but hasn't managed to attain similar dominance in an era of
growing cyberthreats.
For the quarter ended Jan. 1., Symantec posted a profit of $170
million, or 25 cents a share, down from $222 million, or 32 cents a
share, a year earlier. Revenue fell 6% to $909 million.
The company's stock is down 25% over the past year. Symantec
shares are up 7% over the past five years, compared with a 47% rise
in the S&P 500 over the same period.
The company said that the Silver Lake investment and $400
million in cost cuts would help it sharpen its focus on its core
cybersecurity business. Chief Executive Michael Brown said the work
already done, including increasing sales of security software to
businesses, has put the company on better footing for the last
stages of its turnaround.
In August, the company agreed to sell its Veritas unit to a
group of investors led by private-equity firm Carlyle Group LP for
$8 billion in cash. The company had been planning to split into two
publicly traded companies before it agreed to sell Veritas. Last
month, citing "uncertainties," the two sides renegotiated the deal
for a lower price of $7.4 billion.
Silver Lake and Elliott have both made fortunes helping to
revive technology companies that have fallen out of favor or
stalled for various reasons.
The deal gives Silver Lake Managing Partner Ken Hao a seat on
Symantec's board of directors, boosting it to 10 members. Silver
Lake will make its investment by buying $500 million of notes due
2021 with an initial conversion price of $21 a share. Symantec
expects the deal to close early next month.
Symantec just completed a $500 million accelerated stock-buyback
program and is now planning a $4-a-share special dividend and $2.3
billion in additional stock buybacks. The program is slated to wrap
up in March 2017.
For the current quarter, Symantec expects revenue between $885
million and $915 million, with earnings between 15 cents and 18
cents and adjusted earnings between 24 cents and 27 cents.
Write to David Benoit at david.benoit@wsj.com
(END) Dow Jones Newswires
February 04, 2016 20:08 ET (01:08 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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