Symantec Gets $500 Million Investment From Silver Lake -- Update

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 [e-mail]

(END) Dow Jones Newswires

February 04, 2016 20:08 ET (01:08 GMT)

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