Symantec Corp., the ubiquitous security vendor, is in talks to acquire Veritas Software Corp., the dominant data backup player, in a bold move that would position the company to compete on a higher level with rivals such as Computer Associates International Inc. and IBM.
Sources familiar with the situation said that Symantec, based in Cupertino, Calif., has been in discussions with Veritas for some time and is working to resolve the final details of the deal. The move is an interesting one for Symantec, a company that in recent years has shed all of its noncore assets in an effort to focus its attention solely on the lucrative and growing security market.
However, Symantec's CEO, John Thompson, has shown a strong penchant for acquisitions and has said that he would like to see the company's revenue in the $5 billion range in the next few years, a goal that would be difficult to achieve with the company's current product lines. Symantec has been anxious to move more deeply into the enterprise space but has had little success so far. But, Thompson, a former IBM executive, knows well what it takes to catch the attention of CIOs, and having the market-leading data backup solution to go with a broad security portfolio would enable the company to sell more efficiently at the executive level.
"Thompson wants to play with the big fish and it's an opportunity to position Symantec against IBM, CA and those guys," said analyst Pete Lindstrom, research director at Spire Security LLC, based in Malvern, Pa. "Ultimately, Symantec hasn't been able to do much with its enterprise plays. It may be that Symantec discovered that they couldn't leverage their security play into a broader host play."
Symantec officials did not return calls for this story.
The potential acquisition of Veritas, based in Mountain View, Calif., does fit into Symantec's strategy in a couple of ways, Lindstrom said. Symantec recently articulated a new vision called "information integrity," which is meant to encompass all of the various aspects of security and availability. The idea of data backup being part of that is a natural fit. The acquisition of Veritas also would give Symantec a huge potential enterprise customer base.
"Backup is sort of the last bastion of security on the back end," Lindstrom said. "In some ways, security and systems management have always overlapped. There's not a whole lot of synergy on the product side, but if Veritas is doing what they're doing well, let them keep doing it."
Symantec likely began the groundwork for a purchase of Veritas when it first dipped into the storage waters with the acquisition of PowerQuest Corp. in September 2003, said Pete Gerr, analyst for Milford, Mass.-based Enterprise Strategy Group. By bringing PowerQuest's disaster recovery and data protection applications into its technology base, Symantec began to gain understand the nuances and lucrative opportunity to satisfy storage customer needs.
Click here to find out how Symantec is merging security with storage and systems management.
"My impression is that Symantec's efforts to date have not been random. Their acquisition of PowerQuest was a well-thought-out acquisition, and I think it provided the opportunity to learn more about how customers think about storage; acquire storage; buy storage; and where it fits into the enterprise," Gerr said. "[Symantec realized] they'd be selling to a different stakeholder in business then they sell to today."
A marriage between the two companies could be a significant boon for Symantec to bulk up and broaden its mild enterprise presence while potentially driving Veritas backup and storage offerings into an untapped consumer market.
In addition, Gerr said a Symantec and Veritas union would prove devastating toward mutual rival CA's anti-virus and BrightStor storage products.
"If [Symantec] were to acquire Veritas, it would put extreme pressure on CA, even more pressure on CA at a time when CA is already struggling in its position," said Gerr. "Veritas plus Symantec would be the second or third largest software provider out there to give Symantec more claim to being an IT management company and not a security or AV company."
In terms of storage customers, the ESG analyst said the growing importance of concepts including data lifecycle management, corporate governance and compliance is shifting focus to a unified data management and services portfolio.
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