symantec

SYMANTEC CORP. $14 (Nasdaq symbol SYMC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 798.9 million; Market cap: $11.2 billion; Price-to-sales ratio: 1.9; No dividends paid; WSSF Rating: Average) is buying the identity and authentication operations of VeriSign Inc. (Nasdaq symbol VRSN). This business makes Secure Sockets Layer (SSL) software certificates, which web site operators use to cut down on fraud and identitytheft. SSL certificates protect sensitive data, such as names and credit-card numbers, that customers send to web sites when they order products online. Over 2.3 million web sites use VeriSign’s certificates, which makes it the leader in this market. However, this business faces increasing competition from cheaper, though less secure, products. Still, Symantec sees VeriSign’s technology as a good fit with its existing data-security products. Symantec is paying $1.3 billion for these operations. To put this figure in context, Symantec earned $1.2 billion, or $1.51 a share, in its latest fiscal year, which ended April 2, 2010. The deal should close by September 30. The company expects the purchase to lower its earnings by $0.09 a share in its 2011 fiscal year. However, the new business will begin adding to its earnings by September 2011....

Fortinet, $15.72, symbol FTNT on Nasdaq (Shares outstanding: 67.4 million; Market cap: $1.1 billion), is a computer-network security company. The company specializes in unified threat management (UTM). That’s where a single UTM device manages a company’s security. Each device carries software that performs different functions, including firewalls, anti-virus, anti-spam, intrusion, spyware prevention, content filtering and bandwidth management. Fortinet installs the system, then provides updates to block new and emerging threats through a subscription service. Fortinet sells its products to small businesses and large corporations....

The Greek bailout and the poor financial state of major countries rattled the market again this week. Everybody agrees that high government debt and deficit spending are serious problems that must be fixed, but opinions differ about urgency. The biggest pessimists see government debt-and-deficits as terminal conditions that are too far advanced to be reversed. Others see the debt-deficit as more akin to a serious case of high blood pressure – a risk factor, not a death sentence. My view is that a combination of budget cuts, economic growth and a dash of inflation may be enough to gradually unwind the debt-and-deficits problem over a period of years if not decades....

ATLANTIC TELE-NETWORK $44.75 (Nasdaq symbol ATNI; SI Rating: Speculative) (340-777-8000; www.atni.com; Shares outstanding: 15.3 million; Market cap: $683.9 million; Dividend yield: 1.8%) has completed its purchase of more than 895,000 wireless accounts from Verizon Wireless for $200 million in cash. The subscribers are mostly in rural areas of Georgia, North Carolina, South Carolina, Illinois, Ohio and Idaho. The deal should close by the end of this year. Verizon Wireless had to sell these accounts for regulators to approve its purchase of Alltel in January 2009. Regulators also had to approve Atlantic’s purchase of the accounts; the company recently received approval from the U.S. Department of Justice and the Federal Communications Commission. These new accounts will bring Atlantic’s total number of wireless subscribers above one million, up from 200,000 today, and make it one of the largest wireless carriers in the U.S....

HEWLETT-PACKARD CO., $51.97, New York symbol HPQ, is buying smartphone-maker Palm Inc. (Nasdaq symbol PALM) for $1.2 billion. About $1 billion of the purchase price will be in cash; the remaining $200 million consists of Palm’s debt. Hewlett holds cash of $13.6 billion, or $5.79 a share, so it can easily afford this purchase. The deal should close by July 31, 2010. Palm sells mobile-computing and communication devices to consumers and businesses worldwide. The company has one main product line: smartphones, which it sells under the Treo, Centro, Pre and Pixi brands. The Pre and Pixi smartphones use the webOS operating system. Palm will strengthen Hewlett’s own line of wireless devices. It should also help Hewlett compete as more people access the Internet through mobile devices instead of desktop and laptop computers. As well, Palm’s software expertise will help Hewlett develop new products. For example, Hewlett is working on a touch-screen tablet computer that would compete with Apple’s iPad....

WYNDHAM WORLDWIDE, $26.81, symbol WYN on New York, reported higher-than-expected first-quarter profits this week. In the three months ended March 31, 2010, Wyndham’s earnings per share, excluding one-time items, fell 17.1%, to $0.34 from $0.41. Despite the drop, the latest earnings beat the consensus estimate of $0.30 a share. Revenue fell 1.7%, to $886 million from $901 million. Here too, revenue was higher than forecast, even though it declined: the consensus revenue estimate was $848 million. The lower revenue and earnings were mostly the result of an accounting change. The economic recovery is pushing up travel demand and increasing the number of guests at Wyndham’s hotels....

SYMANTEC CORP. $17 (Nasdaq symbol SYMC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 806.2 million; Market cap: $13.7 billion; Price-to-sales ratio: 2.3; No dividends paid; WSSF Rating: Average) makes software that protects computers from viruses and intruders. Computer sales have risen with the recent launch of Microsoft’s Windows 7 operating system. Symantec has deals to pre-install its Norton Anti-Virus software on new computers, so it stands to gain as more consumers buy new computers to get Windows 7. As well, the company has shifted its focus to selling services to its business customers. Long-term service contracts give Symantec more predictable revenue streams, and cut its risk. In Symantec’s third quarter, which ended January 1, 2010, its earnings before one-time items fell 7.4%, to $326.0 million from $352.0 million a year earlier. Earnings per share fell 4.8%, to $0.40 from $0.42, on fewer shares outstanding. Revenue rose 0.8%, to $1.55 billion from $1.54 billion. Symantec gets about half of its revenue from outside the U.S. If you adjust for foreign-exchange rates, revenue would have fallen by 3%....

An improving global economy should push up software sales in 2010. As well, software makers typically earn higher profit margins than other technology companies, so even a modest sales increase would sharply lift these companies’ earnings. Even so, the software industry remains highly volatile. To cut your risk, you should stick with well-established software companies, such as these four. All are market leaders, and have the financial strength to keep improving their products and developing new ones. Still, we only see three as buys right now. MICROSOFT CORP. $29 (Nasdaq symbol MSFT; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 8.8 billion; Market cap: $255.2 billion; Price-to-sales ratio: 4.2; Dividend yield: 1.8%; WSSF Rating: Above Average) is the world’s largest software company. Its Windows operating system runs 90% of the world’s computers. As well, the company’s Office suite of programs dominates the business-software field. Together, Windows and Office account for 60% of Microsoft’s revenue and 80% of its earnings....

TOYOTA MOTOR CO. ADRs, $77.00, New York symbol TM, fell 12% this week after the company said it would recall 4.1 million cars and trucks made since 2005. The recall was triggered by a problem that could cause the gas pedal to stick in the downward position. The company has also temporarily suspended sales and production of the affected models. Toyota and CTS Corp. (New York symbol CTS), the company that makes the gas pedals, have developed a way to fix the problem by installing an extra part inside the gas-pedal system. If auto regulators approve this modification, Toyota and CTS could start delivering these new parts to dealers within the next two weeks. This latest recall is in addition to Toyota’s November 2009 recall of over five million Toyota and Lexus vehicles that it sold in the U.S. The company recalled these vehicles because their gas pedals could get stuck under their floor mats and cause uncontrolled acceleration....

TEMPUR-PEDIC, $24.89, symbol TPX on New York, reported sharply higher revenue and earnings in the latest quarter. In the three months ended December 31, 2009, Tempur-Pedic’s earnings rose 129.1%, to $29.1 million, or $0.38 a share, from $12.7 million, or $0.17 a share, a year earlier. This result was slightly higher than the $0.37 a share that analysts were expecting. The higher earnings were mainly caused by a 29.4% revenue increase, to $244.8 million from $189.1 million a year earlier. As well, the company’s international sales rose 15%, and its U.S. sales jumped 40%....