Symantec CEO Exits as Company Misses Earnings ForecastStock Price Drops After Anti-Virus Firm CEO Greg Clark's Abrupt Departure
In a surprise turn of events, Symantec's CEO, Greg Clark, resigned on Thursday, the same day that the company reported that it had missed earnings estimates. The value of the anti-virus company's stock dropped almost 13 percent on Friday.
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On Thursday, Mountain View, California-based Symantec released its financial results for the fourth quarter of fiscal 2019, ending on March 31. The company reported fourth quarter earnings of $34 million on sales of $1.19 billion - down from $1.21 billion year ago, and below analysts' expectations of $1.21 billion in in sales.
After adjustments, Symantec reported earnings of 39 cents per share, down from 44 cents one year ago, although in line with analysts' expectations.
Symantec now expects first quarter fiscal 2020 profits "to be in the range" of 30 cents to 34 cents per share, which is below analysts' estimates of 40 cents per share, Reuters reports, citing IBES data from Refinitiv.
Some analysts have questioned the sudden, unexpected change in leadership. "This is a disaster of epic proportions," Daniel Ives, an analyst at Wedbush, tells Reuters. "The guidance combined with abrupt CEO departure will be a major gut punch to the Street. There are a lot of questions with minimal answers."
Interim CEO Pledges Revenue Focus
The company's new leadership is already attempting damage control. "Clearly the first priority is to increase revenues," said Richard Hill, a member of Symantec's board who immediately began serving as interim president and CEO following Clark's departure, on a Thursday earnings call.
Hill previously served as chairman and CEO of semiconductor manufacturer Novellus Systems, meaning he has experience with the enterprise sales that Symantec says have been suffering.
"Our enterprise security revenue was below our guidance range due to lower than expected bookings, which led to year-over-year reported billings declining greater than we anticipated," Hill said on the call.
Clark had served as CEO since Aug. 1, 2016, when Symantec acquired Blue Coat, of which he was then CEO, for $4.7 billion, as part of a push to increase its enterprise revenue.
In November 2016, seeking new areas for growth, Symantec announced that it was buying identity theft protection services firm LifeLock for $2.3 billion.
Last December, Bloomberg reported that due to declining interest in anti-virus software by consumers, Clark was attempting to execute "a major shake-up," which had resulted in the departure of president and chief operating officer Michael Fey, chief marketing officer Michael Williams, as well as the senior vice president of go-to-market teams, Bradon Rogers.
During Clark's tenure, Symantec's stock price rose just over 7 percent.
New CEO Search Underway
Symantec says it has begun a search for a permanent replacement for Clark, with Hill serving in the leadership role in the meantime.
"A year ago, Symantec began an investigation that happily resulted in our albeit late fiscal year '18 10-K filing with no adverse material findings," Hill said on a Thursday earnings call. "Around the start of the investigation, I had reached out to a board member of Symantec to offer my assistance."
Hill said that last October, he began to work as an adviser to Clark as well as Symantec's board. "In early April, Greg introduced me to the Symantec field organization, and in late April, he indicated he had personal issues he needed to attend to and wanted to spend more time with his aging father. The board subsequent to that event ... asked the board for volunteers from the board, who could step into the role, while a thorough search was conducted for a permanent CEO."
Commenting on Clark's departure, Hill added: "The pressure is quite high that we want to continue to deliver strong financial results and also growth on the top line for shareholders simultaneously."
The board also announced that Vincent Pilette has been appointed as the new chief financial officer of Symantec, following the departure of Nicholas Noviello, who announced his departure in January. Pilette has been CFO of Logitech and formerly served as the vice president of finance for Hewlett Packard Enterprise's server, storage and networking business.
Whistleblower Sets Off Probe
Clark's departure comes after a tumultuous 2018 for Symantec.
In May 2018, the company's board of directors announced that it was launching an investigation into accounting irregularities after a whistleblower raised concerns. The Securities and Exchange Commission launched a formal investigation.
Symantec's board reported in November 2018 that its investigation had concluded and that it had found that a $13 million fourth-quarter 2018 customer transaction was incorrectly recorded as revenue. As a result, the company said it was deferring $12 million to a subsequent quarter. It also reported finding "certain behavior inconsistent with the company's code of conduct and related policies" and said it would take unspecified human resources actions as a result.
In addition, Symantec's board said it would follow its audit committee's recommendations to appoint a separate chief accounting officer, appoint a chief compliance officer who reports to the audit committee and put better controls in place.
The accounting irregularities are also the focus of a lawsuit brought by James Felix in May 2018 on behalf of everyone who purchased shares of Symantec from May 20, 2017, to May 10, 2018.
An amended complaint filed in November 2018 names Symantec, as well as now-former CEO Clark, former CFO Noviello, as well as former chief accounting officer Mark S. Garfield, accusing them of deceiving shareholders by making "materially false and misleading" financial statements.