Symantec Agrees to Buy Veritas
Top Internet security firm Symantec Corp. said Thursday that it would buy data storage company Veritas Software Corp. for $13.5 billion, the second-highest price ever paid for a software maker.
The friendly, all-stock deal would create the world’s fifth-largest software company. Another deal announced this week, the hard-fought acquisition by Oracle Corp. of PeopleSoft Inc., would establish a new No. 3 behind Microsoft Corp. and IBM Corp.
“This is just the beginning,” predicted Piper Jaffray & Co. analyst David Rudow.
Companies in the fragmented industry are joining together as growth in software sales remains sluggish. Veritas, in particular, has languished.
Its stock has fallen 24% this year and dropped an additional 12 cents Thursday to $27.99 on Nasdaq. Symantec stock, already down this week on word of the merger talks, dropped $2.25 to $25.13.
Veritas “was a company that had to acquire or be acquired,” said RBC Capital Markets analyst Tom Curlin.
“The combination will allow Symantec and Veritas jointly to offer a broader range of products, which should get them a better audience,” he said.
Symantec Chief Executive John Thompson said protecting corporate information from viruses and hackers -- his company’s forte -- was closely related to making complete backup copies of information, which is Veritas’ main business.
Combined products could include e-mail management programs with spam filtering, archiving and protection against outages, said Veritas CEO Gary Bloom, who would join Symantec as president and vice chairman.
Veritas shareholders would get 1.12 shares of Symantec stock for each share of Veritas, leaving them with 40% of the combined company.
Executives said the arrangement would combine Veritas’ penetration of the corporate market with Symantec’s wide exposure to consumers through its top-selling Norton AntiVirus software.
Analysts said the move also reflected concern that Microsoft may be turning from a Symantec ally into a competitor.
The world’s biggest software company has said it plans to offer its own antivirus programs -- and on Thursday it bought a maker of programs for finding and deleting PC “spyware,” widespread and generally deceptive software that tracks where many Internet users go and targets ads to them.
Microsoft Corporate Vice President Gordon Mangione said the company planned to release a new test version of Giant Company Software Inc.’s anti-spyware program within a month.
If shareholders of both companies approve the Symantec-Veritas deal, it could be completed by June. Thompson, a former IBM executive who has overseen a rapid series of smaller security-firm acquisitions at Symantec, said annual savings, achieved through cost cutting, would be about $100 million.
He said revenue in the fiscal year beginning in April should reach $5 billion, up 18% from the previously projected total for the two companies. Profit should be 99 cents a share for the coming year, instead of the 98 cents expected by Wall Street analysts.
Skeptics worried that Thompson was showing a lack of confidence in Symantec’s existing business. They said technology services giant IBM or the other big storage company, EMC Corp., would have been more logical buyers for Veritas.
In addition, they noted, Veritas has restated past results twice in the last two years amid an investigation by the Securities and Exchange Commission.
Software marriages are frequently problematic, even when two companies serve the same customers and are as close physically as Cupertino, Calif.-based Symantec and Mountain View, Calif.-based Veritas.
The only larger software deal, for $14 billion, brought health information systems firm HBO & Co. to McKesson Corp. in 1999. That acquisition was a disaster, and several HBO executives later pleaded guilty to inflating their company’s sales.
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Bestsellers
Top five companies in software sales for most recent fiscal year
(In billions)
Microsoft: $36.8
IBM: $14.3
Oracle/PeopleSoft*: $13
SAP: $9.4
Symantec/Veritas*: $5
Computer Associates: $3.3
*Acquisition pending
Sources: Factiva, company reports
