Aug 11, 2015 6:08 PM
Symantec to sell Veritas business for $8B in cash
The Associated Press
MOUNTAIN VIEW, Calif. (AP) Symantec will sell its Veritas information management business for $8 billion in cash with plans to funnel proceeds back into its main line of work, cybersecurity, and to buy back shares.
The move was cheered by analysts who said the under-performing division was a drag on the company. But Symantec's stock tumbled almost 7 percent after the company reported revenue and earnings below estimates for the last quarter.
The Mountain View, California, company said Tuesday that the private equity investment firm The Carlyle Group and Singapore's sovereign wealth fund, GIC, will acquire the business in a deal expected to close Jan 1.
Symantec Corp. anticipates receiving about $6.3 billion in net proceeds. It said the sale will give it a financial foundation to expand its computer-security business and return capital to shareholders. Symantec had previously announced plans to separate into two companies last fall.
"We applaud the sale," said FBR Capital Markets analyst Daniel Ives, in a note to investors. But he added that Symantec "has its work cut out" as it seeks to resume growth in coming months.
The company also announced Tuesday that its board approved a $1.5 billion increase in its share buyback program, and it has decided to maintain its quarterly cash dividend at 15 cents per share.
Companies often say share repurchases help shareholders, because theoretically they cut down on the total number of shares and thus boost earnings per share. But critics say that repurchases don't usually lower the number of shares outstanding because companies can also issue more shares, and buybacks also divert money that might be spent on new infrastructure or hiring.
Symantec also said Tuesday that it recorded adjusted earnings of 40 cents per share in its fiscal first quarter on $1.5 billion in revenue.
Both figures missed Wall Street expectations, where analysts expected, on average, earnings of 43 cents per share on $1.52 billion in revenue, according to Zacks Investment Research.
Shares of Symantec closed Tuesday down $1.57 to $21.34. The stock is down almost 17 percent so far this year. The Standard & Poor's 500 index, in contrast, has climbed about 1 percent.