Will a split or spinoff unlock Symantec’s value


Nov. 20 2020, Updated 1:32 p.m. ET

Former CEO Steve Bennett’s turnaround plan Symantec 4.0 focused on a transformation within Symantec to an integrated solutions company. Product offerings were aligned across three segments namely user productivity and protection, information management, and information security. However, the recent management change surprised analysts and raised concerns about the outcome of the turnaround strategy. Although Bennett was confident over the success of the plan, revenue has continued to decline and the board felt the company was not moving fast enough towards its 5% organic revenue growth target. Despite robust technology assets and brands, and growing opportunities in the security and storage space, the company has underperformed due to lack of direction.


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Symantec’s made an entry into data storage with the purchase of Veritas Software Corp in 2005, after which the company’s market value started declining as it was unable to successfully integrate the acquisition. The company’s storage revenue has been down despite products such as Backup Exec, NetBackup and the Storage Foundation. According to IDC’s Worldwide Storage Software QView for 3Q 2013, Symantec had a 14% market share and was behind EMC and IBM, who were the top ranking storage software vendors with 25.2% and 15.1% share of the total market, respectively. Gartner said that the total storage software market is forecast to achieve nearly 9% compound annual growth from 2012 through 2017. Rapid data growth and data management needs are propelling the storage management software market, as well as technology innovation in this marketplace.

Symantec last year decided to discontinue its Backup Exec.cloud service as it is facing competition from cheaper and more scalable cloud products providers. The company said in a statement that the “PC backup world is changing. Customers want features such as synch and share and mobile access. Backup Exec.cloud was not designed with these features in mind. As a result, Symantec has decided to discontinue Backup Exec.cloud in order to focus on more productive and feature rich cloud-based applications which include this type of functionality.” Post the announcement, Symantec’s cloud backup rivals such as Carbonite (CARB), Zetta.net, Axcient, Asigra, AVG Technologies announced formal programs to lure the impacted customers. Symantec said it will continue to invest in its core backup and recovery offerings, including on-premise Symantec Backup Exec and NetBackup software and appliances, as well as its cloud-based storage, sharing and synchronization platforms such as Enterprise Vault.cloud, Symantec Endpoint Protection.cloud and Norton Zone.

Symantec is challenged in network and mobile security

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Symantec and Intel Security (formerly McAfee), which are synonymous with the old guard of security software, are facing challenges from newer players such as FireEye and Palo Alto Networks that have the latest technology to deal with the rising cyber attacks. The company has been slow to expand in the antivirus and security products space even as rivals moved from endpoint security software to network security platforms. Symantec is also lagging behind peers in the growing mobile security space, which is dominated by companies such as Lookout Inc, NQ Mobile Inc (NQ), Avast Software and Kaspersky Labs. Gartner estimated last year at its Security & Risk Management Summit that the worldwide security technology and services market will reach $67.2 billion in 2013, up 8.7% from 2012 as companies continue to expand the technologies they use to improve their overall security. The market is expected to grow to more than $86 billion in 2016. Gartner analysts see three main trends shaping the security market moving forward — mobile security, big data and advanced targeted attacks.

Cybersecurity is currently a hot segment with technology behemoths like Hewlett-Packard (HPQ) and Cisco Systems (CSCO) as well as new players such as FireEye, Palo Alto Networks, Skyhigh Networks, Lookout, and OpenDNS seeing revenue opportunities in the space. With more data being transmitted and stored through mobile devices and cloud computing, there is a growing need for security to combat advanced cyber attacks. The cloud-based security services market will be worth $2.1 billion in 2013, rising to $3.1 billion in 2015, according to Gartner. It predicts that the top three most sought-after cloud services moving forward will remain email security, web security services and identity and access management. However, in 2013 and 2014, the highest growth is forecast to occur in cloud-based tokenisation and encryption, security information and event management (SIEM), vulnerability assessment and web application firewalls. Overall adoption of software as a service (SaaS) applications and other cloud-based services encourages organizations to adopt cloud-based security controls.

Will a spin off or sale unlock value?

Symantec has faced calls from analysts and investors since 2010 for splitting its storage and security businesses due to the lack of synergies between the two units. Bennet’s appointment in 2012 had intensified speculation that the company might split or spin off its security software or storage businesses, but that did not materialize. The company also denied rumors early last year that it plans to sell Altiris Inc, an IT management software that manages ‘end point connections’ such as laptops and mobile devices. Analysts believe a spin off of its under performing assets such as the consumer businesses either via sale or IPO, and focus on the profitable units would create more shareholder value and revive the stock. Forrester Research security analyst Rick Holland said Symantec needs to innovate quickly, and options apart from a break up could include taking the company private so it can make major acquisitions and invest in new technologies.


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