symantec

SYMANTEC CORP. $17.07 (Nasdaq symbol SYMC; SI Rating: Average) (1-408-517-8000; www.symantec.com; Shares outstanding: 924.6 million; Market cap: $15.8 billion) is a leading maker of antivirus and Internet security software. Symantec’s best known product is Norton AntiVirus, comprising 30% of revenues. Norton continues to benefit from the growth of the Internet. Increased use of e-mail, the web and mobile devices guarantees continued threats from viruses. In 2005, Symantec expanded its product range when it purchased Veritas Software for $13.5 billion in stock. Veritas is a market leader in data storage, backup and archiving software. In the three months ended December 31, 2006, Symantec’s sales rose 14.3%, to $1.31 billion from $1.15 billion a year earlier (all amounts in U.S. dollars). Ongoing earnings (excluding one-time costs mostly related to the integration of Veritas) fell 12.1%, to $248 million from $282 million, due to weakness in its data center business and higher costs. Ongoing per share earnings were unchanged at $0.26 on fewer shares outstanding....

INTEL CORP. $20.82, Nasdaq symbol INTC, earned $0.26 a share in the fourth quarter of 2006, down 35.0% from $0.40 a year earlier. The company began expensing stock options in 2006, which cut its earnings in the most recent quarter by $0.04 a share. Restructuring costs also weighed on earnings in the latest quarter. Revenue fell 4.9%, to $9.7 billion from $10.2 billion, due to a price war with rival chipmaker Advanced Micro Devices. But Intel spent 17% of its 2006 revenue of $6.10 a share on research, so it’s more profitable than it looks. The company is phasing out older chips in favor of its more powerful dual-core and quad-core chips. But Intel is still ramping up production of these new products. The costs of running plants below full capacity cut its gross profit margin in the fourth quarter to 49.6% of revenue, from 61.8% a year earlier. Intel feels its margins will hover around 50% in 2007. The news spooked investors, and the stock fell roughly 7%. But Intel’s new chips should help it win back market share it lost to AMD in the past two years, particularly as next month’s release of the new Microsoft Windows Vista operating system spurs computer sales....

SYMANTEC CORP. $16 (Nasdaq symbol SYMC; WSSF Rating: Average) makes software that helps guard computers from viruses and electronic attacks. Its best-known product is Norton Anti-Virus, the world’s top selling anti-virus program. In the past few years, Symantec has aggressively expanded its corporate services operations. Selling a variety of programs to businesses gives it steadier revenue streams than consumer software sales. As part of this strategy, Symantec recently paid $11 billion in stock for Veritas Software Corp., which specializes in data storage products for businesses. That’s huge considering that Symantec earned just $0.26 a share (total $282.4 million) on revenue of $1.25 billion in its third fiscal quarter ended December 31, 2005. These figures exclude merger expenses and other one-time costs. The company spends 15% of its sales of $3.50 a share on research, so it’s more profitable than it appears....

Our recommendations in software stocks have delivered huge gains in the past few years. But many now face growing competition from free software on the Internet, or they trade at high p/e’s. Computer makers are also demanding lower prices for pre-installed programs to keep the costs of new computers down. We still hold a high opinion of these top software makers, but we advise against new buying right now. AUTODESK INC. $38 (Nasdaq symbol ADSK; WSSF Rating: Average) makes AutoCAD, the world’s top selling computer aided design program. About 4 million architects and engineers in over 100 countries use it to design and test new buildings and products. This business supplies nearly 90% of its revenue. The remainder comes from programs that filmmakers use to create special effects....

I still haven’t come across anything to beat FAIR ISAAC INC. $44 (New York symbol FIC; WSSF Rating: Average), our “Stock of the Year” for aggressive investors in 2005. So for now, we’ll let Fair Isaac hang on to the Stock of the Year title for 2006. Our Stocks of the Year, particularly Symantec (Nasdaq symbol SYMC) from 2000-2003 and Autodesk (Nasdaq symbol ADSK) in 2004, have produced great gains for us, averaging 61.6% in the past five years. This record may lead some readers to overindulge in our choice for 2006. Unfortunately, in the stock market, nobody gets it right every time. Our most widely followed stock of the year may turn out to be the one that disappoints....