Foolish Forecast: Symantec Shoots for 2

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In an economy like this one, you might not expect computer viruses to top the list of people's concerns -- but that hasn't prevented Symantec (Nasdaq: SYMC) from exceeding expectations seven quarters running. Can Symantec make it an even two years? We'll find out Wednesday afternoon, when fiscal Q2 2009 results arrive.

What analysts say:

• Buy, sell, or waffle? Thirty-two analysts give Symantec 17 buy ratings and 15 holds.
• Revenue. On average, they're looking for sales to grow 7% to $1.54 billion.
• Earnings. Profits are predicted to rise 21% to $0.35 per share (pro forma).

What management says:
Praising Symantec's "ability to cross-sell and up-sell the breadth of our product portfolio ... reflected in the number of large transactions that include multiple products," CEO John Thompson characterized Symantec's fiscal 2009 as "off to a terrific start." As far as the estimates go, Symantec agrees with the revenue guess -- saying revs should range between $1.52 billion and $1.56 billion. On profits, though, make careful note: The analysts cribbed that "$0.35 per share" number from the CEO as well, but it's the pro forma number only. Under GAAP, Symantec expects to earn only about $0.16.

What management does:
GAAP is, of course, the number used to generate the data you see below. And even under GAAP, Symantec is performing quite well indeed. Operating margins have been climbing steadily, passing VeriSign (Nasdaq: VRSN) and closing the gap with rivals like McAfee (NYSE: MFE) and CA (NYSE: CA). On the bottom line, we see Symantec earning about 21% more profit per revenue dollar than it was earning a year ago.

Margins	3/07	6/07	9/07	12/07	3/08	7/08
Gross	83.2%	83.4%	83.9%	84.7%	85.2%	85.7%
Operating	11.4%	11.0%	10.8%	11.6%	13.1%	14.9%
Net	7.8%	7.5%	5.9%	5.9%	7.9%	9.1%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
For all the good news, one thing does worry me about Symantec. Long, long ago, I had a bit of a running feud with management over its large-scale stock options issuance program. For a time, Symantec seemed to be making progress on the dilution issue, but in September, an 8-K filing with the SEC suggested that the company may be slipping back into its old habits.

According to the filing, Symantec is in the process of upping its stock options program by some 50 million shares. That number alone could result in a potential dilution to outside shareholders by as much as 6% over time. And while the figures are confusing, it appears that the total size of the program, not including previously granted options, could push the share count up by as much as 139.4 million. In all, that could result in as much as 16% dilution of the existing shareholder base. Happy Halloween.

What did we expect out of Symantec's report last quarter, and what did we get? Find out in:

• Symantec Scrimps and Soars
• Foolish Forecast: Summer of Symantec