Novice Investing - One Billion Worry for Symantec

Date: Friday 05th 2008f September 2008 05:33:53 PM

One Billion Worry for Symantec - 04/21/2006

By: Novice Investing Staff

Late Monday April 17th, Symantec Corp. (SYMC) received a call from the IRS regarding a $ 1 Billion tax shortfall. Anyway, you slice it, it ain't pretty. And that should not even happened to corporations with hundreds of accountants working its taxes. To be fair, the tax shortfall was caused by Veritas software, which is now part of Symantec Corp. But, a shortfall is a shortfall and if proven guilty, Symantec should pay that $ 1 Billion plus interest.

One Billion dollars is a lot of money, even for Symantec. The latest balance sheet shows that Symantec has a $ 2.8 Billion net cash. While this issue will not break the company, it will dent Symantec's balance sheet strength. Sure, the company will still have a positive $ 1.8 Billion of net cash after the payout but its competitive strength will decrease somewhat. We should point out that while Symantec does have excess cash, it also has a $ 10.0 Billion goodwill from its past acquisitions of Veritas. Normally, carrying a huge balance of goodwill is not favorable as it might indicate that the company overpays for an asset that it thought worth more. In the case of Symantec, the fruit of its acquisition will come a few years later. If the combined Symantec-Veritas company can deliver earnings higher than when they are separate entities, then the acquisition can be considered a success.

So, what should investors do about Symantec? There is no positive news from the company as of late and things do not seem to point upwards. The Veritas acquisition still has not borne fruit yet. Meanwhile, Symantec executives are jumping ship, as we point out in our commentary. However, the company is the leader in its industry and it is expected to earn $ 1.00 per share for the fiscal year ending in December 2006. While Symantec has not traded below our buy point yet, it is worth watching this one. Once the smoke clears up, it will be a good investment to make.



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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Symantec Corp. or any other securities.

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