At the same time, Thompson promised that the “combined company would offer customers one of the broadest portfolios of software and solutions on the most complete set of operating platforms, and across all tiers of the infrastructure.”
This deal, valued at an estimated $13.5 billion, positions Symantec as the fourth largest software company in the world with projected revenue of $5 billion for fiscal 2006. It also positions Symantec against other large IT providers including IBM, HP, CA, and even Microsoft. Microsoft has made its intentions known by acquiring anti-virus vendor GeCad and desktop security provider Pelican Software. Having Microsoft in the anti-virus market would present serious competition to Symantec’s consumer business, which makes up about half of the current company’s revenue. Going forward, the consumer business is expected to contribute about a quarter of the company’s total revenue.
Because there’s little if any overlap in the product lines, merging functionality won’t present an issue and current customers can rest easy knowing they won’t be forced to migrate to another product. But because there is no overlap in the products and little in the customer bases, the breadth of product and customers technical support must service could be daunting. Both the support and sales staff will require hefty training budgets to deliver at levels enterprise customers have come to expect. It is important to note that Veritas brings expertise and experience in selling to enterprise customers, which isn’t currently a strength of Symantec. A Symantec spokesperson said it’s still too early to know if support will be consolidated or remain separate since the products and customer bases are so different, Veritas dealing with enterprise customers while Symantec deals largely with consumers.
This deal makes Symantec a real player in the enterprise game and the company is considering a new pricing model for enterprises. Under this model, customers would pay a single price for all products and services they use. The intent is to make Symantec the one-stop shop for an enterprise’s security needs. This is a change from the current pricing model in which enterprises pay a monthly fee for managed security and monitoring services but pay annual license fees for software. The new model would reduce costs and simplify things for enterprise customers.
Also missing are the typical synergies of development and sales teams but the company says this merger isn’t about cost synergies, it’s about meeting the needs of customers and the company’s shared vision. Even so, Greg Myers, Symantec CFO, said that the combined company is, “ assuming about $100 million in operating synergies between the two companies. About $13 million of these synergies should be realized in our first combined quarter with larger reductions as we move through the integration process in FY-06.”
There are a number of other issues the company must address as they develop a roadmap for the new Symantec and new products but company executives are bullish on the company vision. Gary Bloom, chairman, president, and CEO of Veritas, now vice-chairman and president of Symantec said, “The Veritas strategy, to enable Utility Computing, has been about improving the availability of business applications and data. As our customers have begun to migrate to a Utility Computing model, availability and security of information have emerged as their top priorities. At the same time our customers are looking to consolidate suppliers and eliminate complexity. A single company that can secure and make available all their information represents a unique value proposition.”
As consolidation continues in the enterprise software market, there will be more competitors getting together to increase financial viability but this merger of non-competitors could be a sign that at least some vendors are looking to M&A to deliver new and unique solutions customers want and need.
