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Blue Coat Acquisition Ends Symantec’s Search for a CEO

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Greg Clark is new CEO of Symantec

Earlier in the series, we looked at Symantec’s (SYMC) latest acquisition—Blue Coat Systems. In May 2016, Symantec announced that the company was searching for a new CEO (chief executive officer) after its current CEO Michael Brown stepped down after the company’s dismal fiscal 4Q16 results. With the Blue Coat acquisition, Symantec put an end to its search for a new CEO. The two companies have announced that Greg Clark, current CEO of Blue Coat, will take over as CEO of Symantec and join the company’s board after it finalizes the acquisition in 3Q16.

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Symantec’s future offerings are centered on advanced endpoint protection, cloud security, and security analytics. The SMAC (social, mobile, analytics, and cloud) revolution has forced companies to consider cloud security a top priority. According to 451 Research, for a majority of tech (technology) players, cloud security is now a prominent feature, whether it’s Amazon Web Services (AMZN), Oracle (ORCL), VMWare (VMW), or Microsoft (MSFT).

Increased funding and management change in Symantec after the Blue Coat acquisition

Symantec intends to use its cash and $2.8 billion in new debt to fund the Blue Coat acquisition. Bain Capital will put $750 million in the form of convertible notes into the company. After the acquisition is finalized, David Humphrey, managing director of Bain Capital, will join Symantec’s board.

Ajei Gopal, who is currently an operating partner at Silver Lake and joined Symantec as interim president and COO (chief operating officer), will leave Symantec.

Silver Lake, a private equity firm that earlier invested $500 million in Symantec, has now raised its investment to $1 billion through 2% convertible notes due in 2021. The convertible notes are unsecured and non-callable with an initial conversion price of ~$20.41 per share. This conversion price translates to approximately an 18% premium on Symantec’s stock price on June 10, 2016.

Investors who want exposure to Symantec can consider investing in the PowerShares QQQ ETF (QQQ). QQQ has an exposure of ~27% to application software. It invests ~0.3% of its holdings in Symantec.

In the next part of our series, we’ll look at Symantec’s value proposition in the US software space.

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