Symantec Corp. (SYMC): F3Q15 Trader Preview

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Symantec Corp.  (SYMC):  F3Q15 Trader Preview

Rating  UNDERPERFORM

Price Target $20.00

Price $25.60

We expect mixed F3Q results with Consumer likely a bit weaker than expectations and Enterprise likely stronger (at constant currencies). Volatile FX translation will be key to appraising results and guidance. We look forward to updates on the company's tax-free spin of its Information Management business.

We expect mixed Consumer and Enterprise results.Enterprise results should be minimally in-line, and likely better than expectations as we believe the quarter benefited from a number of factors including an increase in license compliance deals, channel incentives, and a benefit from the timing of large enterprise renewals. We expect Consumer revenue to be down hi-single to low-double digit % in the quarter, vs. expectations for a mid-single digit decline.

Significant FX impact. Along with the rest of our coverage, we reduced SYMC estimates twice over the past 2 months for foreign currency exposure. We estimate a -$12m FX headwind to F3Q total revenue and -$56m impact to deferred revenue since the company last issued guidance. We estimate FX will have about a half penny impact to non-GAAP EPS.

F4Q guidance. We expect the company to issue F4Q guidance in line with Street expectations, on an FX adjusted basis. With the US dollar further strengthening F3Q since quarter end, we expect F4Q guided revenue and non-GAAP EPS will be impacted by -$44m and -$0.01, respectively, relative to FX rates when the company last issued guidance.

IM Spin Update. With great investor anticipation of the company's pending spin off of the Information Management business, we are keen to learn of any progress and visibility to the separation process, projected capitalization, and timeline.