Report: Symantec eyes $13B Veritas acquisition

A deal could be announced as early as this week

Symantec Corp. is negotiating to buy Veritas Software Corp. for more than $13 billion, according to a report today in The New York Times, a move seen by analysts as not very surprising given Symantec's recent moves to expand beyond its core antivirus and firewall technology products.

Negotiations are almost complete, and the companies could announce a deal this week, although a number of issues remain to be resolved after more than a month of talks, and the deal could still fall through. The newspaper based its report on executives close to the negotiations.

A Symantec spokeswoman said today that the Cupertino, Calif.-based company doesn't comment on "rumors and speculation." Representatives from Mountain View, Calif.-based Veritas couldn't be reached for comment.

Veritas sells backup, archiving and file-system software and has around 6,700 staffers in 40 countries, according to its 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 has 6,000 employees and sells software to protect computer systems and networks, including firewalls and tools to detect viruses and network intrusions. Symantec reported revenue of $1.87 billion in its last fiscal year, which ended March 31, and reported revenue of $618 million for the quarter ended Sept. 30.

If Symantec does indeed purchase Veritas, it would be in keeping with the company's recently stated plans to grow beyond its antivirus and firewall products, said John Pescatore, an analyst at Stamford, Conn.-based Gartner Inc. "Symantec wants to be more like an IBM" in terms of its software portfolio, he said. "It's easy to see why that's happening because a lot of the people there are ex-IBM."

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

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

Much of the investments are driven by Symantec's desire to expand its portfolio at a time of increasing competition in the security market, said Pete Lindstrom, an analyst at Spire Security LLC in Malvern, Pa. "It's an acknowledgment that there's just too much ambiguity in the security space to grow a huge company out of.

"You need something a little more solid and foundational. Backup software is recession-proof," Lindstrom said. "You don't need to have to worry about the ebbs and flows of the threat [landscape]."

The effect on users remains of a potential acquisition remains unclear. Because of the vastly different nature of products each vendor sells, it's unlikely that customers of either one will see a big difference in the short term, Pescatore said. "A vast amount of security purchases are being made with security budgets," he said. "There's a strong separation between the security budget and the [software] administration budgets" used to purchase software such as that sold by Veritas.

Stanley Kovler, an industry analyst at New York-based Merrill Lynch & Co., said in a research note today that Symantec's interest in Veritas could spark a bidding war for Veritas by other vendors, including Oracle Corp., EMC Corp., IBM and Hitachi Data Systems Corp.

"EMC is running out of large-enough storage software companies to acquire, and Veritas would in one fell swoop allow EMC to obtain the critical mass that would allow the company to obtain 30% of revenue from software," Kovler said. "Veritas would make a good fit for Hitachi, which has a good box but is behind EMC in storage software."

Computerworld's Lucas Mearian contributed to this story.

Copyright © 2004 IDG Communications, Inc.

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