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Topic: Growth Stocks

Two tech stocks restructure operations in order to spur growth

Two tech stocks restructure operations in order to spur growth

SYMANTEC CORP. (Nasdaq symbol SYMC; www.symantec.com) sells computer security technology, including anti-virus and email filtering software, to businesses and consumers. It also offers data-archiving software.

In Symantec’s fiscal 2014 second quarter, which ended September 27, 2013, its earnings rose 11.6%, to $355 million, or $0.50 a share. A year earlier, it earned $318 million, or $0.45.

Savings from Symantec’s new restructuring plan were behind the gains. This initiative includes laying off 30% to 40% of its managers and simplifying its product lines.

Revenue fell 3.6%, to $1.6 billion from $1.7 billion. The company was retraining its sales staff as part of its restructuring, which kept it from closing some deals. Lower personal computer demand also hurt its software sales.

Symantec’s restructuring plan should raise its gross profit margin (gross profits as a percentage of revenue) from 27.6% in the latest quarter to at least 30% in fiscal 2015.

Meanwhile, the company continues to spend a high 15% of its revenue on research. That hurts its earnings but helps it develop profitable products and respond to new viruses and other online threats. That’s particularly important as businesses shift their sensitive data to a cloud-computing environment.

Tech stocks: Adobe exceeds goal in new subscriptions to Creative Cloud package

ADOBE SYSTEMS INC. (Nasdaq symbol ADBE; www.adobe.com) makes a range of software that lets computer users create, edit and share documents in the popular PDF format. As well, graphic designers use its software to create print publications and web pages.

Adobe earned $164.6 million, or $0.32 a share, in its fiscal 2013 fourth quarter, which ended November 29, 2013. That’s down 46.5% from $307.9 million, or $0.61 a share, a year earlier. Revenue fell 9.7%, to $1.04 billion from $1.15 billion.

Last year, the company starting selling its Creative Cloud package of photo-editing and desktop publishing programs as a subscription instead of a onetime purchase. Adobe added 402,000 Creative Cloud subscribers during the quarter, to bring its total to 1.44 million. That beat its goal of 1.25 million.

In the latest edition of Stock Pickers Digest Hotline, we look at whether Symantec can sustain its profits as it continues both its high research spending and a restructuring plan. We also examine Adobe’s earnings outlook in light of the company’s exposure to cyclical businesses like publishing. We conclude with our clear buy-hold-sell advice on these two stocks.

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COMMENTS PLEASE—Share your investment knowledge and opinions with fellow TSINetwork.ca members

When you buy tech stocks, do you look for companies whose history of research and development suggests they can keep pace with rapid changes in technology? Or do you look for something more concrete, like domination of a strong niche market (like Symantec in security software)? Are there other important indicators you look for in tech stocks?

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