Symantec's Moat Dries Up

Ilya Kundozerov: We recently downgraded Symantec to a no-moat company. Symantec operates in the highly competitive information security industry, and we think that there are very few companies that can maintain a long-term, sustainable, competitive advantage. 

Symantec's consumer cybersecurity segment is under pressure from low-cost and free product offerings. This market space is also shrinking as more and more consumers are migrating to mobile devices such as smartphones and tablets, where the monetization of cybersecurity offerings has been difficult so far. Symantec is also one of the leading vendors in the corporate desktop and laptop protection market, where we view the company's products as becoming increasingly stale due to a lack of innovation in the face of growing sophistication of cyberattacks.

However, we do think that the recent acquisition of Bluecoat will strengthen the enterprise business.

Overall, we believe that the success of the company in the long run depends on how effective Symantec can be at growing revenues and the margin profile of its enterprise business. At current levels we view the stock as overvalued, and we suggest technology investors look elsewhere for an investment.