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Market analysis

The software sector had mixed results in Q1 2016 with two companies reporting a marginal decline and three companies reporting marginal growth in revenue year over year. Adobe reported significant growth of 24.7% year over year to US$1.4bn. Symantec, on the other hand, reported the sharpest decline in revenue of 42.5% to US$873 million. The sector’s total net income was also very volatile this quarter due to acquisition and divestiture activity. Adobe, Intuit and Symantec each more than doubled their net income year over year.

Worldwide revenues for big data and business analytics is expected to grow from nearly US$122 billion in 2015 to more than US$187 billion in 2019, an increase of more than 50% over the five-year forecast period. The services-related opportunity may account for more than half of all big data and business analytics revenue, with IT Services generating close to three times the annual revenues of Business Services. Software is predicted to be the second largest category, generating more than US$55 billion in revenues in 2019.1

The industries that present the largest revenue opportunities are Discrete Manufacturing (US$22.8 billion in 2019), Banking (US$22.1 billion), and Process Manufacturing (US$16.4 billion). Large and very large companies will be the primary driver of the big data and business analytics opportunity, generating revenues of more than US$140 billion in 2019. However, small and medium businesses will also remain a significant contributor.1

Internet of Things (IoT) security spend is also rising. Worldwide spending on IoT security is expected to reach US$348 million in 2016, a 23.7% increase from 2015’s US$281.5 million. Spending on IoT security is expected to reach US$547 million by 2018. Although overall spending will initially be moderate, IoT security market spending will increase at a faster rate after 2020, as improved skills, organizational change and more scalable service options improve execution. While the market for IoT security products is currently small, it is growing as both consumers and businesses use connected devices in ever greater numbers. It is forecasted that 6.4 billion connected things will be in use worldwide in 2016, up 30% from 2015, and will reach 11.4 billion by 2018. However, considerable variation exists among different industry sectors as a result of different levels of prioritization and security awareness.2

From a geographic perspective, more than half of all big data and business analytics revenue is expected to come from the United States. The US market for big data and business analytics solutions is expected to reach more than US$98 billion. The second largest geographic region will be Western Europe, followed by Asia/Pacific (excluding Japan) and Latin America.

On February 1, 2016 Intuit completed the sale of its Demandforce business. On April 1, 2016 it also completed the sales of its QuickBase and Quicken businesses. The company received US$463 million in cash and reported a US$354 million pre-tax gain on the disposal of these three businesses. The pre-tax gain was partially offset by a related income tax provision of US$178 million. Intuit has progressed well in its move towards cloud. Due to the gradual change in the company's revenue model, there is an anticipated decline in near-term revenue. Intuit also plans to make further enhancements to its tax offerings, which should support future growth. During the third quarter, QuickBooks’ ‘total paying’ Online subscribers (the largest operating segment, contributing approximately 50% of the revenue) grew by 14% sequentially. By replicating its offerings in the cloud, the company is expected to gain more predictable and recurring revenue streams.

Symantec plans to cut 1,200 jobs and close a quarter of its offices in an ambitious move to cut costs. Symantec faces challenges amid a broad migration to next-generation subscription products. In line with Symantec’s previous capital structure plans, the company has returned US$4.2 billion of the previously announced US$5.5 billion capital return program related to the sale of Veritas. The company is expected to return the remaining US$1.3 billion by the end of the current fiscal year.

Symantec has said that to support its capital structure plans, it has entered into a US$2 billion credit facility, including a US$1 billion refinancing of revolving credit facility and a new US$1 billion pre-payable term loan.


1., May 2016
2., April 2016