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Wednesday, October 25, 2006

Symantec Falls On Its Own Sword
















Tonight, Symantec (SYMC) looks all about the charts........

Symantec pulled a bad one. You may need to ask what the acronyms are, but FUBAR and SNAFU may be what they did to themselves. Honestly, this doesn't look all that bad on the surface if you just talk about a growth company that has been in the dreggs for a long time. You have to look past the news.

Here is what the news was:

Revenues grew 20% year over year to $1.26 Billion and earnings more than doubled to $0.26 EPS before options and items. The problem is that they were supposed to post $1.29 Billion and $0.27. The company earlier forecast on its own that it would have $1.27 Billion revenues and that it would post $0.26 to $0.27 on EPS. The company gave forward guidance of $0.14-0.15 GAAP EPS and $0.29 to $0.30 non-GAAP EPS and revenues of $1.32 Billion to $1.35 Billion. The street is looking for expectations at $0.295 or $0.30 and $1.35 Billion. It reaffirmed fiscal targets of $1.06 to $1.16 EPS and $5.1 to $5.3 Billion versus estimates of $1.12 and and $5.33 Billion.

"Our results for the September quarter met the low end of our expectations. With the most challenging part of the fiscal year behind us, I believe our business remains healthy and we are poised to achieve our full-year financial targets," said John W. Thompson, chairman and chief executive, in a statement.

So, let's look further into this.

The problem is that the company was in the midst of finally regaining trust from the investment community, and the street thought the numbers would be fairly easy to beat. You can talk about news all day long, but the chartists may be out tomorrow en-masse saying "AH HAH!" and pointing things out. They broke their chart is what they will say. And they may have broken something that was barely mended. It may even be the formation of the wrong end of a head and shoulders, if you believe in classic chart patterns.

We'll have to see if anyone can give this a nudge, but if there is no outside help to nudge the stock then they hosed themselves. Since Symantec bought Veritas they broke their great path upward and broke their chart. But now the rest of the street has been making storage add-on purchases and it doesn't seem so bad of a strategy. In September SYMC holders FINALLY saw the stock get back over $20.00 and it stayed above $20.00 every day. They finally had gotten out of a long-term downtrend, things seemed good inside the company, and even the knit-picky chartists were looking as though they were ready to be positive.

They didn't fall on their own sword so fatally that the stock looks ready for new lows, but they probably spooked any chartist that was bullish before this afternoon. IF they are lucky, and now it may be a big if, then those shares may get back over $20.00. If it gets within sniffing distance of it within a few pennies and can stay there without a meltdown, then there may be some safety. But if it stays under that mark and doesn't get back over it in a hurry then those chartists are going to have a really good case that the chart is broken.

Shares of SYMC closed down $0.01 at $20.78 in regular trading. Then the report came out and their troubles started. As I started writing this the shares were down at $19.70, down $1.08; but at the time it went to post after doing some other work the shares had slipped to $19.25 in after-hours.

It would be nice to see if this stock could get out of the dead money category, but I don't have any dogs in the fight.

Jon C. Ogg
October 25, 2006
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