McAfee is selling its enterprise-software arm.
David Paul Morris/Bloomberg
McAfee shares are trading sharply lower despite strong first quarter results from the provider of consumer-focused computer-security software. The pending spinoff of the company’s enterprise-security business makes the numbers a little difficult to parse, and some investors are disappointed with its guidance.
In March, McAfee (Ticker: MCFE) announced a deal to sell its enterprise software arm to the private-equity firm Symphony Technology Group for $4 billion in cash. On Wednesday, the company presented March quarter financial results that treat the enterprise business as a discontinued operation.
On that basis, the company had revenue of $442 million for its fiscal first quarter, ended March 27. The total was up 25% from a year earlier, with net income from continuing operations of 16 cents a share. The company reported adjusted earnings before interest, taxes, depreciation and amortization, or Ebitda, of $199 million.
Including the enterprise business that is being sold, revenue was $773 million, up 13%, and profits were 18 cents a share.
For the June quarter, McAfee projects revenue from continuing operations of $430 million to $434 million, with adjusted Ebitda of $161 million to $165 million, including $40 million to $45 million in “stranded costs” as a result of the disposal of the enterprise business. Stranded costs are expenses relating to the business being sold that will linger for a time even after the transaction.
For the full year, McAfee sees revenue from continuing operations of $1.77 billion to $1.79 billion, with adjusted Ebitda of $693 million to $703 million, including $150 milloin of stranded costs.
“McAfee achieved significant increases in revenue, subscribers, profitability and cash flow to start Fiscal 2021,” McAfee CEO Peter Leav said in a statement. He added that the company added 885,000 net new direct-to-consumer subscribers in the quarter.
UBS analyst Fatima Boolani said in a research note that net additions were the second-highest in nine quarters, underscoring broad-based growth in users across geographies and sales channels that was aided by a strong PC market.
She says the first-quarter results were better than she had expected. But she also noted that the second-quarter guidance was lower than anticipated, and that McAfee increased its full year forecast by less than the margin of the first-quarter beat. “We foresee investor consternation,” she writes. Boolani nonetheless keeps her Buy rating on the stock, and lifts her target to $27, from $25.
McAfee shares are down 9.8%, to $21.74.
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