Point/Counterpoint

Posted on January 01, 2005

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Symantec & Veritas: PB & J or oil & water?

Let’s see: a $13 billion acquisition resulting in a company with 13,000 employees. This is starting to sound unlucky to me.

Although I should have figured out the Symantec-Veritas deal by now, I’m still scratching my head. We knew that Veritas was in play back in December, and the financial analysts were betting on EMC, Hitachi, IBM, Microsoft, or even Oracle as potential suitors. But when it comes to Veritas, I think EMC would rather beat ’em than buy ’em; Hitachi is primarily a hardware vendor that seems content to partner for software expertise; IBM has most of what Veritas has; Microsoft is more likely to acquire a second-tier backup software provider or go it alone; and Oracle hadn’t even forked over the $10.3 billion for PeopleSoft back in mid-December.

My long-odds money was on a Hewlett-Packard acquisition of Veritas (although even Carly probably couldn’t have talked the HP board into that one).

I suppose that from a shareholder perspective the deal may make some sense. But from a product and competition angle, I don’t get it.

Sure, I understand the simplistic view: Storage + Security = Good. But even though the two technologies may be converging, they’re still distinct and I don’t think that end users really care whether they buy from one vendor or two (or more).

So much for the one-stop-shop argument in favor of the merger. Besides, melding storage and security isn’t new. Computer Associates has been doing that for years, and just because they’ve integrated the two doesn’t necessarily mean that they’ve fared any better in either market.

Symantec had to gear up to combat Microsoft on the security front, and Veritas was staring at the lights of the oncoming train from Hopkinton, but will the combined company fare any better in those encounters? Only time (and a lot of it) will tell, but I’m doubtful.

On the plus side, both companies get expanded channels. And there’s virtually no product overlap. But the huge challenge is how/when the companies’ products will be integrated. And their executives’ often- repeated mantra about “synergies” between the two product lines is highly debatable.

Unless they’re shareholders, I’d guess that most end users greeted this deal with a big yawn-despite the enormity of it and the surprise factor. The two companies’ product lines will continue to be top shelf, and service and support won’t suffer.

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One thing’s for sure: M&A mania in the storage market is back in full swing as we cruise into 2005.

Dave Simpson
Editor-in-chief


Why the Symantec-Veritas deal does make sense

When Symantec first spoke to me about its new business division-Symantec Enterprise Administration (SEA)-last spring, I was a little skeptical, or at least confused, about the company’s direction.

Their vision of an integrated management suite spanning security, systems management, and storage management, grand as it was, lacked substance. It did, however, jibe with industry trends toward more-unified data management.

But my gut told me there was a bigger story here, and last month the story unfolded. While the idea of a security company-even one the size of Symantec-moving into the storage biz is difficult for some to grasp, I’m among those who believe that the Symantec-Veritas deal makes a lot of sense-and for many reasons. (I also applauded EMC’s decision to buy Documentum for $1.7 billion.)

I’d argue that the merger is a testament to three larger, more-powerful trends at work in the industry today, as evidenced by the increasing number of storage/non-storage mergers and acquisitions over the past year or so:

  1. The ongoing convergence of traditional networking and storage networking;
  2. The criticality of information across the enterprise; and
  3. The demand for unified data platforms and utility computing.

That said, do I think that the Symantec-Veritas deal will result in a sudden surge in end-user interest in storage security products? No. In fact, I’m not certain what form “storage security” will ultimately take, nor do I think discussions about this merger should center on this point.

I’d argue that data/information availability, wherever the data resides-not storage security-is the issue at hand. International Data Corp. has pegged the total market opportunity for the combined company at $35 billion, growing to $56 billion by 2007. I think it’s safe to say that the bulk of the opportunity won’t come from sales of storage security products, in whatever form they take.

Regardless, with projected revenue of $5 billion next year, Symantec- Veritas will be a major force. The next question is, what’s next? Will Symantec stop here? Maybe it will take EMC’s lead and delve into compliance or even content management. After all, it’s all information. Stranger things have happened.

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Heidi Biggar
Senior Technical Editor


AT A GLANCE

Symantec-Veritas

  • Expected value: $13.5 billion in an all-stock deal
  • Symantec shareholders to own about 60%, and Veritas shareholders 40%, of the combined company, which will retain the Symantec name
  • Deal is expected to close in the next quarter
  • Combined company will be the world’s fourth-largest software vendor, with combined revenues of more than $4 billion
  • Management expects 75% of revenues to come from enterprise customers, with 25% coming from sales to consumers
  • John W. Thompson to remain chairman and CEO, with Gary Bloom (formerly Veritas’ CEO) as vice chairman and president


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