Symantec Corporation (SYMC) reported third quarter 2010 earnings per share of 40 cents, exceeding the Zacks Consensus Estimate of 33 cents.
 
Revenue
 
Symantec reported quarterly GAAP net revenue of $1.55 billion, down 2% from $1.51 billion reported in the year-ago quarter. Non-GAAP revenue for the quarter was $1.551 billion, up 1% from $1.535 billion reported in the year-ago quarter. The sequential improvement in revenue may be attributed to the strong momentum in the consumer business, improvements in the company’s license revenue and stabilization of maintenance revenues.

Coming to business segments, Symantec’s Consumer segment contributed 31.0% of the total revenue, up 7.0% from the year ago quarter. The increase was largely driven by the 2010 Norton Internet Security and Norton Anti-virus products that have been well accepted in the market. The Security and Compliance segment contributed 24.0% of total revenue, up 3.0% from the year ago quarter. The Storage and Server Management segment contributed 38.0% of total revenue, down 4.0% from the year ago quarter. This may be attributed to the deceleration server business, which put pressure on the storage business, particularly related to new license sales on the Sun platform. The Services segment contributed 7.0% of total non-GAAP revenue, flat year-over-year.

Operating Results
 
Gross margin on a GAAP basis was 83.3% in the quarter, up from 80.3% reported in the year-ago quarter. Excluding special items such as stock compensation, amortization of acquired products and deferred revenue, non-GAAP gross margin for the quarter remained flat at 86.5%, compared to 86.6% reported in the year-ago period. Gross margin increased as total cost of revenue decreased substantially by 14.0% while there was an increase in revenue.
 
Operating margin on a GAAP basis was 17.9% for the reported quarter, compared with an operating loss margin of 447.4% for the same quarter last year. Excluding special items, non-GAAP operating margin for the quarter was 28.3%, down from 32.2% reported in the year-ago quarter.
 
Net income on a GAAP basis for the quarter was $300.0 million compared with a net loss of $6.8 billion for the same quarter last year. This resulted in GAAP earnings per share of 37 cents compared to loss per share of $8.25 for the same quarter last year. Including special items such as stock compensation, litigation settlements and non-cash interest expense, non-GAAP net income for the quarter was $326.0 million, compared to $352.0 million reported in the year-ago quarter. This resulted in non-GAAP earnings per share of 40 cents, compared with 42 cents for the year-ago quarter.
 
Balance Sheet and Cash Flow
 
Symantec generated cash flow from operating activities of $393 million in the reported quarter and spent around $121.0 million to repurchase 6.8 million shares at an average price of $17.76. The company ended the quarter with cash, cash equivalents and short-term investments of $2.61 billion. The company does not have any long term debt. Day’s Sales Outstanding (DSO) at the end of the quarter was 53 days.
 
Guidance
 
For the fourth quarter of 2010, GAAP revenue is estimated between $1.507 billion and $1.522 billion. GAAP diluted earnings per share are estimated at between 16 cents and 17 cents. The company expects GAAP deferred revenue in the range of $3.162 billion to $3.192 billion. On a non-GAAP basis, the company expects revenue for the fourth quarter of fiscal year 2010 in the range of $1.510 billion to $1.525 billion. Non-GAAP diluted earnings per share are estimated at between 36 cents and 37 cents, while non-GAAP deferred revenue is expected to be in the range of $3.175 billion to $3.205 billion.

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