Symantec and Veritas merge in deal valued at $13.5 billion

The all-stock transaction is expected to be completed by mid-2005

Symantec Corp. and Veritas Software Corp. have agreed to merge in an all-stock transaction valued at $13.5 billion based on Symantec's stock price of $27.38 at yesterday's market close.

The merged entity will be the fourth-largest software company in the world, with revenue of $5 billion and a product portfolio that combines Symantec's range of security products with Veritas' backup, archiving and file system software.

In a news conference announcing the merger this morning, Symantec CEO John W. Thompson said the new company would be uniquely positioned to deliver a complete range of information security and application availability technologies for both large and small companies.

"We have an enormous opportunity to leverage each other's strengths. This is not a typical merger focused on reducing cost and redundant infrastructure," Thompson said. "There's no overlap in strategic product lines or R&D."

Under the agreement, which has been approved by the boards of both companies, Veritas shareholders will get 1.1242 shares of Symantec stock for each Veritas share they own. Symantec shareholders will own approximately 60% of the combined company, while Veritas shareholders will own 40%.

The merger is expected to be completed sometime in the second quarter of 2005 and could result in some layoffs. And while there will be some cost savings resulting from the merger, that is not the primary reason for it, Thompson said.

Veritas sells backup, archiving and file system software. The company is based in Mountain View, Calif., and has 6,700 employees in 40 countries, according to the company's Web site. Veritas reported revenue of $1.75 billion for the year to Dec. 31, 2003, and $497 million for the quarter to Sept. 30.

Symantec sells software to protect computer systems and networks, including firewalls and tools to detect viruses and network intrusions. Its 6,000 workers are managed from Cupertino, Calif. Symantec reported revenue of $1.87 billion in its past fiscal year, which ended March 31, and revenue of $618 million for the quarter that ended Sept. 30.

The merger is in keeping with Symantec's bid to position itself as a vendor of a complete range of enterprise risk and security management technologies, according to Steve Hunt, an analyst at Cambridge, Mass.-based Forrester Research Inc.

"Symantec is in the process of reinventing itself as an enterprise risk management company," Hunt said. "They have a new slogan, which is to keep business up and running and growing no matter what happens."

The merger will allow both companies to sell their respective technologies to each other's customer bases far more effectively than they would have been able to do otherwise, Hunt said. "One of the most expensive parts about security is doing managed backup and data archival. We could see the Symantec portfolio representing one of the most operationally efficient security suites available."

Last month, Symantec outlined an "information integrity" strategy under which it said it would focus on delivering management products designed to give users a more holistic view of the risk and vulnerabilities they face. (see story).

Earlier this year, Symantec purchased antispam vendor Brightmail Inc. in San Francisco for $370 million and security consultant @Stake Inc. in Cambridge, Mass. Last week, it announced plans to acquire intrusion-prevention system vendor Platform Logic in Glenwood, Md., and invested $12 million in Mazu Networks Inc., another Cambridge-based vendor of intrusion-prevention technologies.

Some Symantec users welcomed the news and said the merger would allow the company to strengthen its technology portfolio.

"I think Symantec is doing what it has to do," said Lloyd Hession, chief security officer at Radianz, a New York-based provider of network services to the financial services industry. "They are a big software company and very big in the security industry. The consolidation is key to their business strategy because it gives them more products to leverage their [existing] relationships" with enterprise accounts, he said.

"For Symantec's goal of information integrity, I could understand why Symantec would want to merge with Veritas since it deals with both securing the data and ensuring availability," said Shaun Catlin, a senior systems analyst at Atlanta-based law firm Ford & Harrison LLP. "But as a backup administrator, there could be confusion as some would think, Why is an antivirus company merging with a data company?"

A lot will depend on how well Symantec succeeds in integrating Veritas, he said.

The merger is a "smart move" by Symantec, said Dave Jordan, chief information security officer for the Arlington County government in Virginia. "I think we need to stop thinking of Symantec as a security vendor and more as the Wal-Mart of the cyber-industry. They are flush with cash, they have top-of-the-line products and are at the top of their game."

Some financial analysts said the merger could slow Symantec's growth in the short term.

Washington-based investment firm Friedman, Billings, Ramsey Group Inc. today downgraded Symantec's stock, citing growth concerns. "While we believe, longer term, that the acquisition of [Veritas] could make for an exciting company, we are concerned about the negative impact it will have on [Symantec's] growth profile," the company said in an advisory.

The merger will also position Symantec more favorably against increased competition in the security industry, most notably from Microsoft Corp., analysts said.

IDG News Service contributed to this story.

Copyright © 2004 IDG Communications, Inc.

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