An Off Quarter for Symantec

The honeymoon between Symantec and Veritas was short-lived, at least as far as outsiders are concerned.

Symantec's first earnings report following fully combined operations of the two companies disclosed several problems. Sales of its core antivirus product were poor, its forecast for next quarter was disappointing, and the storage software products it got from Veritas grew less than usual. To top it off, Symantec's CFO Greg Myers announced he will retire at the end of the year while the company is still adjusting to its new bulk following the $13.5 billion acquisition of Veritas. (See Symantec & Veritas: It's a Deal.)

CEO John Thompson tried to put a happy face on it all last night, calling it "an exciting time for all of us," but at least four Wall Street analysts downgraded the companys stock today and the price fell more than 19 percent to $19.37 by late afternoon.

While the Veritas storage software didn't tank, it didn't exactly bounce back from the previous quarter when it lost market share to leading competitors. (See IDC: Storage Software Surges.) Data protection software -- mostly Backup Exec and Net Backup -- produced revenue of $289 million, down 10 percent from the previous quarter and up 2 percent from the same quarter last year. Storage management revenue of $254 million was down 6 percent sequentially and up 6 percent year-over-year, although that category now includes Symantec's PCanywhere product that had a steep decline.

Symantec execs tried to play down the low growth as normal seasonality, but in the same quarter last year Veritas revenue was up 2 percent sequentially and 11 percent year-over-year. (See Veritas Rebounds.)A clear sign that Symantec has yet to fully understand its new storage business came during the earnings conference call when Thompson was asked about its enterprise Net Backup product. Thompson answered by talking about how good “Net Backup 10d” is doing. There is no Net Backup 10d; Thompson confused Net Backup with Backup Exec, the Windows-based backup platform that recently upgraded to 10d. (See Symantec Intros Backup Exec .)

"That type of complete misunderstanding of the Veritas business permeates the whole management team," one financial analyst snickered. "It's like they have no idea what they bought."

Analysts didn't take the news of CFO Myers' retirement well either. Several expressed dismay in notes to clients that Myers and COO John Schwarz have left the company so soon after the Veritas deal. (See Kicked Upstairs.) "Given that we are clearly in the early innings of integration, this adds another dimension of risk," Gregg Moskowitz of Susquehanna Financial Group wrote to clients. "Two-thirds of what has been an immensely successful triumvirate will no longer be with the company."

Former Veritas CEO Gary Bloom replaced Schwarz in September. A search is on for Myers' replacement.

— Dave Raffo, Senior Editor, Byte and Switch