Worms create rough ride for Symantec

Since arriving in 1999, Symantec chief executive John Thompson has tried to transform the security software maker, to make it less dependent on the volatile consumer market and more reliant on stable corporate revenue. Thompson made some headway in 2002 and 2003, but the recent rash of viruses threatens to undo that limited success, as analysts forecast that the consumer businesses will end the fiscal year as Symantec's chief revenue source.

"The company has been told many times by Wall Street it was not growing its enterprise business fast enough. It has been showing some growth, but not to the degree people had hoped for," said Tom Berquist, a Smith Barney Citigroup analyst. "There is risk in relying heavily on consumer sales. If virus attacks slow down and people have bought all the protection they need, then Symantec's growth will slow down to the rate of IT as a whole. They need to step up their enterprise-security business that is not tied to antivirus, in case consumer antivirus slows."

Symantec, which reports fourth-quarter results on Wednesday, represents the business side of the rampant security threats facing all PC owners. Through its Norton products -- such as Internet Security, Personal Firewall, SystemWorks and AntiVirus -- it is one of the companies able to turn bad news into profit. But should fickle consumers decide they've got enough protection or turn to other products, Symantec will need to have its enterprise business pulling in more revenue.

The software maker is aware of the risk. In a filing with the Securities and Exchange Commission, it noted: "We believe that a significant portion of the growth in consumer revenue during the nine months ended 31 December, 2003, was attributable to the numerous security threat outbreaks that occurred in August 2003 and may not be sustainable."

In its fiscal third quarter, which ended in December, Symantec posted a 55 percent year-over-year increase in consumer sales for a total of $242.4m (£135.8m), which represented 49 percent of overall revenue. Enterprise security, which rose 17 percent to $186.7m, accounted for 38 percent of revenue.