SYMANTEC CORP. $14 (Nasdaq symbol SYMC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 821 million; Market cap: $11.5 billion; Price-to-sales ratio: 1.9; WSSF Rating: Average) makes software that protects computers from viruses and intruders.

The company is best known for its top-selling Norton Anti-Virus program. Products aimed at individual computer users supply 30% of Symantec’s revenue, and half of its earnings. Symantec mainly sells its products in retail stores and through online downloads. It also encourages users to renew their licences every year. Selling anti-virus products on a subscription basis gives Symantec predictable revenue streams and cuts its risk.

Symantec continues to increase its focus on selling security software and other services to corporate customers, mostly through companies it has acquired. Symantec’s biggest acquisition to date was its $13.5-billion, all-stock purchase of data-storage specialist Veritas in July 2005.

Thanks mainly to Veritas, business products now account for 70% of Symantec’s revenue. Business demand for products like firewalls (which protect computers from electronic attacks), junk email filters and secure data storage is growing strongly, particularly as businesses sell more products online and must safeguard sensitive customer data.

Goodwill writedown causes big loss

In Symantec’s third fiscal quarter, which ended January 2, 2009, it lost $8.23 a share (or a total of $6.8 billion). The loss was mainly the result of a $7-billion, non-cash writedown of goodwill. Symantec earned $0.15 a share, or $131.9 million, in the yearearlier quarter. If you disregard all unusual items, per-share earnings grew 27.3%, to $0.42 from $0.33.

Revenue fell 0.1%, to $1.51 billion from $1.52 billion a year earlier. The company gets about half of its revenue from overseas markets, and the stronger U.S. dollar hurt the contribution of its international sales. Symantec signed 448 contracts in the quarter, worth more than $300,000 each, including 104 worth over $1 million.

Symantec’s research spending fell 9.1% in the quarter, to $204.7 million, or 13.5% of its revenue, from $225.3 million, or 14.9% of its revenue, a year earlier. The drop is because the company shrank its research operations as it integrated new acquisitions. Accounting rules force Symantec to treat research as an ordinary expense, instead of as a long-term investment. However, these outlays help Symantec stay competitive in a rapidly changing field.

Symantec holds $1.5 billion, or $1.86 a share, in cash, and its $2.1-billion long-term debt is a manageable 1.2 times its annual cash flow. That should support its high research costs and let it keep making acquisitions.

The stock now trades at 9.8 times the $1.43 a share it will probably earn in its current fiscal year. That’s low in light of Symantec’s strong balance sheet, and the growing need for data-security products.

Symantec is a buy.