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Posted on 12/17/2004 2:49:54 PM PST by Ernest_at_the_Beach
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AN FRANCISCO, Dec. 16 - The Symantec Corporation, a leader in security software and one of Silicon Valley's oldest companies, announced early Thursday that it would acquire Veritas Software, a maker of data storage programs, to create the world's fourth-largest software company. The all-stock transaction was valued at $13.5 billion.
The deal, which is expected to close in the second quarter of next year, will give the combined company revenue of $5 billion next year. Only Microsoft, Oracle and SAP, a German-based competitor, would have greater software sales.
Capping a week that began with Oracle's acquisition of PeopleSoft, a maker of business software, Symantec's acquisition of Veritas is part of a larger consolidation trend in corporate software, driven by the need to cut costs and provide a bundle of products. The merger would create a one-stop provider of tools for data storage, security and management, which have become increasingly critical to businesses.
Symantec, best known for the Norton line of security software, has 40 percent of the $2.7 billion market for antivirus software. Veritas, with revenue of $1.75 billion last year, is a major supplier of software that corporations use for data backup and archiving.
When the deal is completed, Symantec shareholders will own approximately 60 percent of the combined company, which will continue to operate as Symantec. The new company will have approximately $5 billion in cash and 13,000 employees worldwide. About 75 percent of the revenue of the combined company is expected to come from corporate business and 25 percent from consumer sales, executives of the companies said.
Elsewhere in the industry, Microsoft announced Thursday that it had acquired Giant Software, a privately held maker of security software focused on removing spyware from computers. That deal is likely to put further pressure on Symantec and other companies selling security software.
To many investors and industry analysts, the move signals Microsoft's interest in becoming a dominant player in the lucrative antivirus field. Shares of McAfee, a Symantec competitor in the antivirus market, fell $3.48, to $29.23, on Thursday after news of the Microsoft-Giant deal.
The Microsoft acquisition, analysts said, also played some role in the decline of Symantec shares, which fell $2.25, to $25.13. Shares of Veritas dropped 12 cents, to $27.99.
The Symantec deal also raised concern among some investors that integration and other merger-related issues could cause a slowdown in Symantec's annual growth rate. Yearly growth at Veritas has slowed to about 10 percent.
But officials at Symantec said the combined company was expected to have 18 percent revenue growth in the fiscal year ending March 2006. Financial analysts said the merger made sense for Symantec in the long run, but the next two years would be challenging because integrating operations and product lines could be difficult.
"Our customers have been looking to consolidate suppliers and eliminate complexity," said Gary L. Bloom, chairman, president and chief executive of Veritas, who will become vice chairman and president of the combined company. "A single company that can secure and make available all their information represents a unique value proposition."
John W. Thompson, a former I.B.M. executive who became chairman and chief executive of Symantec four and a half years ago, will run the combined company. According to analysts, Mr. Thompson's background gives him a good perspective on the needs of corporate technology managers.
"Corporate information technology managers hate having to go to several vendors," said Tim Bajarin, principal analyst at Creative Strategies, a technology consultant and market research company. "Having a single provider is at the heart of the consolidation."
Nitsan Hargil, an analyst with Friedman, Billings, Ramsey, said that "long term, the company is placing itself exactly where it wants to be" because the two companies have the best technology in different categories. However, he added: "We should expect low growth, lack of synergy and integration costs. Those will weigh on Symantec in the short term."
Symantec, based in Cupertino, Calif., has in recent years been at the forefront of an effort to track the perpetrators of computer viruses and other security breaches. In just the last 18 months, Symantec has also broadened its products by acquiring On Technology, SafeWeb and Brightmail, a leading seller of anti-spam technology.
Veritas, based in Mountain View, Calif., was also well on its way to widening its portfolio, and like many companies, has been moving from selling software packages toward providing corporations with more comprehensive services.
Symantec was advised by Lehman Brothers and the law firm of Fenwick & West LLP. Veritas was advised by Goldman Sachs and the law firm Simpson Thacher & Bartlett LLP.
They also acquired Powerquest, maker of PartitionMagic, not sure when that was however.
Rivals hope for the worst for Symantec
By Dawn Kawamoto
http://marketwatch-cnet.com.com, marketwatch-cnet.com.com/Rivals+hope+for+the+worst+for+Symantec/2100-7350_3-5494528.html
Story last modified Thu Dec 16 16:40:00 PST 2004
Looking for a cloud in Symantec's latest silver lining, competitors are hoping the company's acquisition of Veritas Software will be a stumbling block for the security company.
On Thursday, Symantec announced that it planned to merge with the storage software maker in a $13 billion deal. While Symantec has successfully integrated nearly a dozen acquisitions in the last three years, the latest merger plan has competitors hoping for the worst.
"This is the largest software acquisition in history," said Jim Geronaitis, vice president of Computer Associates International's storage management division. "And both of the companies are trying to integrate their previous acquisitions, so the new company is going to be hard-pressed to bring anything else into the organizations for some time to come."
The deal pits the resulting security and storage company against new foes and old allies. Storage company EMC, a fair-weather partner of Symantec but rival of Veritas, will compete directly with the new company in storage. IBM--a sometimes-ally, sometimes-enemy of Symantec--will be more of a direct rival because of its significant share of the storage market and recent moves in the security space.
Symantec's potential enemies predicted a tough merger for the new company.______________________________snip______________________________
fyi
Symantec is fast becoming a "one stop shopping center" for IT security and business continuity.
Not a big fan of mega-mergers - it reduces alternatives and competition in the marketplace
Me neither. However, in this case there are still plenty of players in the IT security game.
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