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December 22, 2004

Symantec looks to bright future with Veritas

Symantec Corp is still in the throes of establishing just how it will brand Veritas Software Corp's products once its acquisition of the company is completed - but it meanwhile insists that the merger will not cause significant job losses from the Veritas ranks.

By CBR Staff Writer

In an interview with ComputerWire, Symantec senior vice president for global technology and corporate development, Ajei Gopal, said that, Veritas is a trusted brand in the enterprise, and so is Symantec. Exactly how we brand [the acquired Veritas products] going forward has not been worked out. What I can say is that we will aim to build on the brand value. If you look historically, for example when we acquired BrightMail, we called it Symantec BrightMail and we still do.

Security company Symantec announced its intention to buy storage management and utility computing player Veritas on December 16, for $13.5 billion. It is a deal that will create the world’s fourth largest pure-play software company and pose a competitive threat to a large number of companies in both the storage and security sectors.

Asked whether there is likely to be a significant headcount reduction when the deal closes – likely to be in the second quarter of 2005 – Gopal would say only that, Both companies are of approximately the same size and scale. We expect to take advantage of the skills of both companies, and in fact we would expect to be able to continue to grow the company. This is not a merger based on the goal of the elimination of cost. It is a deal done for strategic reasons.

One possible conclusion to be drawn from the move is that Symantec is aiming to become more of an infrastructure management company, managing not only security and storage but systems too. It already has some capability in this area thanks to its acquisition of On Technology Corp in October 2003, and it will soon also be able to draw on the provisioning and applications management technology that Veritas acquired by buying Jareva Technologies and Precise Software.

Moving in this direction of course leads it into a head to head battle with the systems management vendors such as IBM-Tivoli, HP, Computer Associates, NetIQ and Evidian. Of these, Computer Associates has the broadest portfolio so far, thanks to its eTrust security management; BrightStor storage; Unicenter enterprise management; CleverPath portal and business Intelligence; AllFusion life cycle management and Advantage data management and application development product lines.

So is Symantec on the road to building out its capability in all of these areas, and in particular building upon its On Technology acquisition in the systems management space? I think the way to think of this is as an evolution, said Gopal. We needed to take the company from security into availability, in effect to start to do data integrity. That action is not complete. It is far from complete. But our immediate goal is to absolutely deliver on the promise, and that means our immediate focus is on integration [of Veritas, once the deal closes]. When it all passes compliance and so on we think it will close in April ’05. There is a lot of work to be done [on integration]. We need to make sure that we deliver the deal to the marketplace. That means integration.

But does that mean that once the integration is complete, the company will make a larger systems management acquisition than the $100 million On Technology buy? This [the Veritas deal] is where we need to go today, said Gopal. Later on as we deliver other solutions there will be areas where we partner and areas where we acquire. There are a number of companies that do [systems management] frameworks. We work effectively with all of the frameworks today. Right now our focus is on pulling all of these pieces together.

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Finally, there is the question of whether Veritas will in the long-term act as a drag on Symantec’s sales growth, based on the fact that in the full year to December 31 2003, Symantec grew sales by 32.9% to $1.8 billion, while Veritas grew sales at a lesser 17.6% to $1.77 billion. While Symantec is in its quiet period which precludes Gopal from commenting on the company’s imminent financial results – and the Veritas deal will not affect Symantec’s sales until well after the deal closes in April 2005 – Gopal did say that, As for the broad question, we believe that both companies have huge growth opportunities. There is a lot of potential already, and we think we can unlock a lot more potential still.

Gopal would not say whether it was Veritas or Symantec that made the first move in the merger discussions. I can’t tell you, but I can say that this was two CEOs who knew one another, getting together and having discussions about where both companies should logically be going. It was not one company pursuing another, it was more of a merger, he said. A merger, nonetheless, where Symantec shareholders end up with 60% of the combined company, and Veritas shareholders the remaining 40%.

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