Alphabet Real Estate Delay May Hinder NortonLifeLock Fundraising

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(Bloomberg) -- A broad restructuring effort at NortonLifeLock Inc. that includes the sale of offices in California could be thrown off-balance after Google-parent Alphabet Inc. reportedly pulled back on several real estate deals.

The reversal -- first reported by the Information -- comes as Norton, formerly known as Symantec, attempts to shed lingering costs associated with its enterprise security business. That unit was sold to Broadcom Inc. in November, but Norton still holds an office campus in Mountain View in Silicon Valley, where the company was previously headquartered. It’s now based in Tempe, Arizona.

The Mercury News reported that Alphabet had an agreement in principle to purchase the property, and the 10 buildings on site, before shifting gears. Norton and Alphabet didn’t immediately respond to requests for comment.

The change of plans throws a wrench in Norton’s cost-cutting measures, analysts at UBS Securities led by Fatima Boolani said in a note. They identified the sale of the property as a “notable funding source” to help with about $1 billion in stranded costs. But UBS emphasized that the setback presented by the shift from Alphabet is temporary.

“[Management’s] successful fast-tracking of comp and headcount related cost elimination thus far, leaves us confident that timeliness of buildings disposal is likely to remain a top priority,” Boolani said. UBS reaffirmed a buy rating on NortonLifeLock and a price target of $23, about 16% above where the stock traded Wednesday.

UBS also noted that efforts by NortonLifeLock to cash in on its assets could be hurt if commercial real estate prices weaken due to the virus.

Mark Cash, an analyst at Morningstar Inc., said Alphabet’s move could force Norton to accept a lower price for the property, but didn’t expect it to have a substantial impact overall.

“A lot of NLOK’s strategy comes from extracting costs as it becomes a much slimmer organization, compared to when it was Symantec, and rewarding shareholders, so potentially some progress is delayed,” Cash said in an email. “But I wouldn’t expect this to be a major game changer when you look at all the restructuring efforts going on.”

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