View all newsletters
Receive our newsletter - data, insights and analysis delivered to you
  1. Technology
January 5, 2005

Symantec and Veritas pitch merger to shareholders

The CEOs of Symantec Corp and Veritas Software Corp have tried to sell the benefits of their proposed merger to investors, saying it will creating the fastest-growing large software company and playing down defensive motivations for the deal.

By CBR Staff Writer

The all-stock deal, worth $13.5 billion when it was announced, will create an infrastructure management company of $5 billion revenue in fiscal 2006, growing at 18%, and addressing a 2007 market estimated at $56 billion, they said.

Symantec’s John Thompson and Veritas’s Gary Bloom said the deal will make the combined company, which will keep the Symantec name and keep Thompson as CEO, the fastest-growing software company over $3 billion.

Shareholder approval from both companies is needed before the deal can close. Regulatory approval is also needed, but there is so little product crossover that should be a formality.

The combination of Symantec’s security software and Veritas’s storage software – the two areas customers are said to be directing much of their IT budgets – is intended to create a leader in what the companies are calling infrastructure management.

What customers want is a single vendor to provide both of those, better integrated and better packaged, so they can reduce the overall cost and complexity… this transaction is all about that, Thompson said.

Bloom said: There’s a direct relationship between the two, because you start thinking about what could we do differently in the products area if we knew a virus was coming? How would you manage the performance and availability of applications?

Would you failover to a secure site, would you potentially on the other hand start doing incremental backups more frequently? In other words you can do responsive and proactive rather than always being in reactive mode, he said.

Content from our partners
Scan and deliver
GenAI cybersecurity: "A super-human analyst, with a brain the size of a planet."
Cloud, AI, and cyber security – highlights from DTX Manchester

Bloom said that broadly the company will look at bundling opportunities and loosely-coupled integrations as its earliest deliverables. Deep product integration will also happen, but will take longer, he said.

The CEOs said there was a great packaging opportunity to deliver a complete environment for Exchange, Microsoft’s messaging server, where Symantec provides email security and Veritas recently acquired archiving capabilities.

There’s a strong compliance sales pitch there, the CEOs said, with enterprises looking at how they can best address regulations such as the data integrity provisions of Sarbanes-Oxley.

Both CEOs played down the defensive reasons for the merger, pointing out that both companies are high-flying category leaders, neither of which are in immediate need of rescuing.

This wasn’t a risk-mitigation combination, this was a combination driven by two strong companies, neither of which in my view needed to do this transaction, Bloom said.

Thompson again defended himself from skeptics who say the merger is a defensive move for Symantec, designed to keep the company growing despite an expected pricing crunch and new competitors including Microsoft Corp.

We have always had to compete against free offerings in the channel… in reality it has not had a material effect on our business to date, Thompson said, pointing to occasional promotional offerings from its top four rivals.

Microsoft will enter the market soon. The rumored A1 security subscription service is expected to combine the antivirus and anti-spyware capabilities Microsoft has acquired over the last 18 months.

Thompson said he expects Microsoft to deliver antivirus mid-year, and some kind of behavior blocking in the OS earlier than that. He said: Let me be clear. We don’t think that Microsoft will have a material effect on our consumer revenues in the current fiscal year.

The current fiscal year for Symantec ends in April. Thompson admitted that the merger, which would see consumers produce 28% of revenue as opposed to over half, balances out what some people see as the risk for Symantec on the consumer side.

Another trend that threatens Symantec’s margins was suggested by the deal between McAfee Inc and America Online. That deal sees McAfee’s security subscriptions bundled free with AOL’s service. That, and a number of other service provider deals, are arguably McAfee’s response to Microsoft’s looming competition.

That’s not to suggest that as more players enter the market and as service providers think more about what their value proposition might be to the consumer that there won’t be pricing pressure on core antivirus, Thompson said.

This transaction is not about that, this transaction is about serving the needs of large enterprise customers, it has nothing to do with consumers whatsoever, he said.

For Veritas, Bloom said the deal gives the company the opportunity to produce lower-end products for the kinds of companies Symantec services, while Symantec gets access to larger enterprises.

Bloom added that the deal signals to the big hardware companies, like Sun Microsystems, that Veritas will continue to be a pure software company, and will not be pressured to tie up with or be acquired by a single hardware vendor.

It’s almost guaranteed that we’ll be hetereogenous, we’ll be open, we’ll be software, Bloom said. It should… unleash a whole wave of partnering opportunity, because now all the different hardware vendors don’t have any lingering concerns… are they [Veritas] going to land with a different hardware vendor? That goes away.

The deal’s value has dropped somewhat since it was announced. A clearly frustrated Thompson said he didn’t expect the announcement to hit Symantec so hard, and said the growth opportunity should command more optimism.

The firm’s shares were trading around $33 before the December 16 announcement, but closed recently at just over $25. I don’t understand the haircut we got, I just don’t, he said.

Websites in our network
Select and enter your corporate email address Tech Monitor's research, insight and analysis examines the frontiers of digital transformation to help tech leaders navigate the future. Our Changelog newsletter delivers our best work to your inbox every week.
  • CIO
  • CTO
  • CISO
  • CSO
  • CFO
  • CDO
  • CEO
  • Architect Founder
  • MD
  • Director
  • Manager
  • Other
Visit our privacy policy for more information about our services, how Progressive Media Investments may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.
THANK YOU