Symantec’s announcement Thursday that it would acquire storage management vendor Veritas Software for $13.5 billion won praise from analysts who noted that Symantec would now become the largest supplier of backup, recovery and archiving software.
Symantec’s announcement Thursday that it would acquire storage management vendor Veritas Software for $13.5 billion won praise from analysts who noted that Symantec would now become the largest supplier of backup, recovery and archiving software.
Forum: Acquisition mania
First Oracle gets to take over PeopleSoft. Now this. How will these deals change the way you look at apps from these vendors? Will they change your software buying decisions?
In the deal, fast-growing Symantec, with its 6,000 employees and annual sales of $1.9 billion, would swallow up Veritas, with its 6,700 employees and $1.8 billion in sales. Each company has more than $2 billion in cash. Symantec has been growing by about a third each quarter, Veritas by less than half that.
Symantec, whose consumer anti-virus sales have funded its push into the corporate market for some time, “is re-inventing itself into a major enterprise security management vendor with acquisitions and a new marketing theme, but they have some gaps,” said Steve Hunt, vice president and research director for security at Forrester.
“Veritas is a successful backup and archiving vendor looking for a way to penetrate the security market which has growing needs for such software,” says Hunt.
Symantec CEO John Thompson, in a conference call with analysts, explained the rationale behind the merger. “Our customers’ recognition that while the regulatory environment requires increased information security, future business opportunities require that more and more information be made available to a greater amount of people,” Thompson said.
“This dichotomy is driving the obvious convergence between securing the infrastructure and ensuring information availability. Combining Veritas and Symantec strengthens our ability to serve the needs of customers with security and availability solutions, thereby securing the integrity of their most valuable asset – information,” Thompson said.
He added that both Veritas and Symantec in the coming weeks would explore possibilities in integrating storage and security protections to automate security processes. Symantec will also consider the possibility of bringing storage technologies into the consumer arena as well.
Veritas CEO Gary Bloom, who will join Symantec as vice chairman and president, said one driver toward combining the two companies is that “our customers are looking to consolidate suppliers and eliminate complexity.” He said he anticipated the Veritas shareholders would be supportive of the acquisition, which faces SEC approval as well.
“I’m always in favor of ‘partnerships’ that give me single-source solutions,” says Jim Miskovsky, director of information technology for Fisher & Phillips, a law firm in Atlanta. “I suspect we’ll see other, similar mergers in 2005 as companies try to better align and leverage their strengths to gain market share.”
Stephanie Balaouras, senior analyst with the Yankee Group, also generally favors the deal.
“Veritas is under increasing competition from EMC and some of its traditional partners like Oracle or Microsoft, who are now becoming their competitors. Symantec has software that can go after the low end of the backup and server management market. [The acquisition] will let them put it all together and hit a couple of different market segments,” she pointed out.
Both companies have been on buying jags to the tune of billions of dollars in the last year or two.
Veritas bought KVS, Invio, Ejasent, Precise Software, The Kernel Group and NTP’s Storage Reporter software. Symantec opened its wallet for storage management start-up PowerQuest, On Technology, Brightmail, Recourse Technologies, RipTech, SecurityFocus, MountainWave and @ Stake. Another Symantec purchase, host-based intrusion-detection systems firm Platform Logic, is pending.
Other users and Wall Street analysts, however, don’t seem as thrilled at the prospect of Symantec buying Veritas.
“We have some questions about support and licensing that Veritas has not addressed,” says David Bucciero, director of systems services at Dartmouth College in Hanover, N.H.
“While we have some time to work out those issues, we do want to know how that comes together. Are they really going to centralize support? Because that is very important to us,” Bucciero says.
“From a budgetary point of view, how is the company going to operate and how is their licensing going to change?” Bucciero asks. He has both Symantec anti-virus software and Veritas’ NetBackup products.
“While the combination of the two companies makes longer-term strategic sense, we believe near-term concerns will weigh on the stock,” says Edward McGuire, an equity analyst with Merrill Lynch in New York in a research note released last week.
“Management was vague on specifics of the integration plan other than indicating it will engage a third-party consulting team,” says McGuire. “It appears the two companies will take a gradual approach to the integration over the next several quarters, which mitigates some near-term execution risk but could also prolong potential disruption.”
According to research firm IDC, Veritas accounts for 40% of the backup, recovery and archiving markets and 60% of the market for data organization and storage. Symantec and main rival McAfee last year each held about a quarter of the $2 billion corporate anti-virus market.
