More than three weeks after Symantec announced its plans to purchase storage management vendor Veritas Software in a US$13.5 billion deal, the company is still struggling to convince skittish investors that the deal make sense for both companies and their customers. Symantec's stock price has slid almost 25 percent in the past month, while Veritas' stock hasn't fared much better.
In an interview with Computerworld, John Schwarz, Symantec's president and chief operating officer, defended the planned merger and said it makes long-term sense for investors and for customers.
Why the concern over the proposed merger? What is it that investors are not getting about your planned purchase of Veritas?
Investors have expressed two concerns that seem to have had an impact on our shares. They are used to getting very high growth rates from Symantec, in the 30 percent range. The combined company is projecting growth rates of 18 percent for the coming year. That is apparently a concern for investors, though, frankly, you are looking at a US$5 billion-a-year-company and there's no other software company that comes close to this kind of growth, certainly none in our size. We think once investors begin to understand that, it is going to allay some of their concerns.
The second point is a lack of understanding of the synergies of the deal. Investors are looking for financial synergies that will be realized over the next six or nine months or so. In reality, what we are projecting and proposing are synergies that are going to be realized by customers and by businesses in the long run as we integrate our offerings and as we are able to simplify our customers purchases.
What exactly are those synergies?
Very simply, if you look at the problem of managing the software infrastructure in any corporate environment, the problem of security and the problem of information integrity is becoming very very connected. In other words, data has to be secure, but it also has to be available. Symantec has traditionally been all about data security, and Veritas is all about information availability and making sure the information is there and is of high integrity when the customer needs it.
The combined company is going to be able to bring together the data security and information integrity in a seamless offering.
But traditionally, security and storage purchases have tended to be made by two very different operational segments within enterprises. Why should that change?
Virtually all of our large customers have been telling us that they are reducing the number of vendors they are dealing with. They want to simplify their procurement, their license management, their installation and their support relationships. The storage and security components are about the closest related components in the infrastructure software area, and having a combined company gives the customer exactly what they are looking for.
So Symantec will deliver integrated storage and security products and not an amalgamation of point products, correct?
That is correct. Very specifically, there are some interesting opportunities early on. We've been talking about infrastructure resilience as one of the critical solutions. In order for the infrastructure to be resilient, it has to be able to recover and restore itself at any point of failure to a known good state.
The security solutions from Symantec, and the knowledge that Symantec has about the threats and vulnerabilities to the environment, can be integrated into the management infrastructure that Veritas brings to the table.
Another area that we are looking at is compliance with various regulatory requirements -- particularly in the U.S. but increasingly also in Europe and elsewhere. The government and various regulatory bodies are requiring organizations to demonstrate information integrity. This is particularly true of Sarbanes-Oxley regulations in the U.S. The combination of the two companies can bring an auditable proof-point that the information a company is using in preparing its books is in fact of high integrity.
Some analysts have suggested that Symantec has had a mixed record when it comes to some of your previous acquisitions, such as Axent Technologies Inc. and Riptech Inc. It's interesting that you point out Axent and RipTech.
Axent is the genesis of the entire Symantec solution portfolio. When you talk about our firewalls, our integrated gateway solutions or whether you talk about (Enterprise Security Manager) as the basis for our management solution or the more recently developed offering in intrusion prevention -- all those are based upon Axent technology. In the RipTech scenario, the combination of RipTech and the original Symantec managed security services is now responsible for managing upwards of 5,000 devices on behalf of over 800 customers. We are comfortable that the acquired companies have been integrated very well.
A lot has been said about Microsoft's planned entry into the security space. What do you think?
Microsoft has no presence in this space at all. Despite many pronouncements over the last two years on this subject, they remain still absent. They ... last week announced a beta version of an antispyware solution which was recently acquired from Giant. The beta that we have been able to test is greatly inferior to anything that is available in the market today from us and from other providers. So, frankly, we are not particularly concerned today that Microsoft is any day soon going to deliver a solution which is competent to satisfy the requirements of our customers.
But Microsoft is obviously a large organization and if they spend enough money and enough time at it, one could imagine that they will deliver a competent product over time. So in that expectation, we have been working to move our customers upmarket to more comprehensive solutions. We will simply compete with Microsoft when they show up in the marketplace.
What's your key message for investors and to customers?
My main message to our investors is to look beyond the current quarter or the next couple of quarters. This acquisition has tremendous value to both companies -- and also very importantly to our investors and to our customers -- in that the strength of the combined business, the management team of the combined business, is unmatched in the industry. As far as customers are concerned, you will get more comprehensive, more integrated, simpler-to-buy and simpler-to-use solutions.