Symantec Corporation (SYMC), AVG Technologies NV (AVG): A Software Company Struggling in the Land of Opportunity

Page 1 of 2

The global storage market is expected to increase from $14.5 billion last year to $15.3 billion this year. Moreover, the antivirus software market is projected to grow approximately 6% year-over-year to $4.65 billion in 2013. Symantec Corporation (NASDAQ:SYMC)'s major revenue generating storage software segment is following the market’s growth trend. This segment registered growth in the fourth quarter of 2013 with its back-up software solution, Netbackup.

Contrary to the growth of the antivirus market, Symantec Corporation (NASDAQ:SYMC)'s Norton antivirus application registered flat figures in the fourth quarter due to availability of free antivirus applications and changing consumer mindset. Will growth in the storage software segment be enough to offset headwinds from Norton antivirus?

Dormant Norton antivirus

Currently, the consumer segment of Symantec Corporation (NASDAQ:SYMC) contributes 31% of the revenue and 38% of profits. This segment is facing risk from availability of free security software and changing consumer trends.

Source: Google Trends

According to the graph, the number of Google searches for Norton antivirus is only 7% compared to 36% for free antivirus’ searches. Moreover, Norton antivirus searches decreased around 30%, year-over-year, in June 2013. These factors led to flat revenue generation of 3%, year-over-year, and $2.1 billion in fiscal year 2013.

Furthermore, I think the decline in PC sales due to skyrocketing smartphone and tablet usage will shift users from PC antivirus towards mobile security, where Symantec Corporation (NASDAQ:SYMC) lags due to its paid antivirus' applications. The total domestic PC market share in the Americas declined from 67% in 2011 to 56% in 2012 and is further expected to decline to 46% this year.

Free antivirus provider AVG Technologies NV (NYSE:AVG) is capitalizing on the changing trends. The popularity of AVG's products is substantiated by the number of downloads on Google store; Android mobile security downloads of AVG range between 50 million to 100 million against Norton antivirus application’s 5 million to 10 million downloads. AVG's edge over Norton antivirus in the Android segment is also supported by the highest user review count on Google Play in June 2013.

The review count of AVG Technologies NV (NYSE:AVG) was 556,000 compared to 118,000 for Norton antivirus. I feel AVG will continue to capitalize on its market dominance with increasing number of smartphones. The number of smartphones is expected to increase from 115.8 million in 2012 to 137.5 million in 2013, and 157.7 million by next year. With the increasing number of smartphones, AVG will be able to gain market share due to increased cross selling of its free security software to smartphone users.

Norton antivirus application is not only facing headwinds from free available alternatives, but its dominance in the PC market is also facing threat due to changing consumer trends. According to the latest Unisys Security Index report, consumers are more concerned about identity theft than computer viruses. Around one-third of the customers are concerned with viruses compared to 57% for identity theft.

In such a scenario, the identity theft products of companies like Lifelock Inc (NYSE:LOCK) have an edge over antivirus products of Symantec Corporation (NASDAQ:SYMC). LifeLock’s brand image and superior products make it consumers’ first choice for identity protection products. Moreover, incidents of identity theft rose to 12.6 million last year, second highest in the last decade, leading to increase in demand for LifeLock’s products. With the increasing number of incidents, Lifelock Inc (NYSE:LOCK) is expected to add approximately 900 new subscribers this year, which is expected to grow revenue 29%, an increase from analysts' estimate of 27% growth.

Considering headwinds from free security software, less popularity among smartphone users, and consumers trending towards identity protection, the market share of Norton antivirus is expected to decline from 46% last year to 43% this year. The revenue from Norton antivirus is expected to remain flat from $2.1 billion in 2013 to $2.15 billion next year and $2.16 billion in 2015.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 30 percentage points in 13 months Learn how!

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!