All last year, Motley Fool Inside Value pick Symantec (NASDAQ:SYMC) zapped Internet viruses, spam emails, and analyst estimates with equal aplomb. But tomorrow is a new day, and time to begin a new fiscal year. How will the fiscal Q1 2009 news play?

What analysts say:

  • Buy, sell, or waffle? Thirty-one analysts crowd around Symantec. Thirteen rate the stock a buy, while 18 think it's just a hold.
  • Revenue. On average, they're looking for sales growth of 11%, $1.57 billion in total.
  • Earnings. Profits are predicted to rise 21% to $0.35 per share (pro forma).

What management says:
Summing up the previous fiscal year, CEO John Thompson said his firm "executed very well across the board and made significant progress." I'll say. In the fourth quarter alone, profits more than tripled over the previous year's Q4, as the company inked "new or extended agreements" with a raft of brand-name clients both public and private, from Washington state to Qualcomm (NASDAQ:QCOM), and Canada's Provincial Health Services Authority to Gerdau S/A (NYSE:GGB), MGM Mirage (NYSE:MGM), and even Sun Microsystems (NASDAQ:JAVA).

What management does:
Gross margin continues its relentless march upward, and even the operating and net numbers have turned up. Sure, there's still room for improvement -- Symantec's operating margin lags those of rivals McAfee (NYSE:MFE) and Microsoft (NASDAQ:MSFT). But Symantec is moving in the right direction.

Margin

12/06

3/07

6/07

9/07

12/07

3/08

Gross

83.3%

83.2%

83.4%

83.9%

84.7%

85.2%

Operating

12.8%

11.4%

11.0%

10.8%

11.6%

13.1%

Net

9.1%

7.8%

7.5%

5.9%

5.9%

7.9%

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:
Still, Symantec's done a fine job of growing revenue lately. In the second half of last year, sales rose 14%. On the other hand, selling, general, and administrative costs rose 16%. If that keeps up, you might expect margin compression and lower profits -- the opposite of what the table above shows.

So where has Symantec been cutting costs to keep its operating margin growing? On R&D, I suspect. Over the past two quarters, as sales grew by double digits, management upped its research and development budget by barely 3%. In the short term, that makes for attractive margins and growing profits. But over the longer term, I fear Symantec may pay through the nose for sitting on its wallet. You see, fellow competitor McAfee isn't sitting still -- it has upped R&D spending by 9% (three times Symantec's rate).

Don't get me wrong, Fools. I'm all for pinching pennies -- but not at the cost of mortgaging the company's future.

Review Symantec's previous quarter:

Both Symantec and Microsoft are Motley Fool Inside Value picks. Try this market-beating publication free for 30 days.

Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy.