Struggling Symantec Refocuses with Veritas Sale

Antivirus giant Symantec is slimming down, with an $8 billion sale of its Veritas data-storage and recovery division to Carlyle Group.

Veritas provides information backup and recovery, storage management, disaster recovery and archiving products.

Symantec CEO Michael Brown said in a statement that the sale allows Symantec to focus on its core security business—a business that, while venerable, faces a host of new competition with products that not only compete with antivirus, but also look to supplant it with new approaches—especially in the consumer space.

As a result, the company has been struggling to keep up with the market, as illustrated by worse-than-expected double-digit declines in revenue and profit in its fiscal first quarter, ended July 3. Symantec posted a profit of $117 million, compared with a prior-year profit of $236 million. Revenue fell precipitously too, 14% to $1.5 billion.

Some however believe that the news is more positive than the top-line number indicates, given that its enterprise security business actually grew in the quarter for the first time in two years. Taking into consideration adjustments for the length of the quarter and currency exchanges, Symantec achieved 3% growth in its enterprise security business.

That’s small compared to the rest of the market—Symantec’s competitors are averaging 21% growth in enterprise security, according to Technology Business Research. But, it shows that there’s hope in focusing more resources on that unit’s strategy for future growth.

“Symantec will use the nearly $8 billion it receives in cash from the sale of Veritas to fund its growth in its enterprise security portfolio and initiatives in 2016,” said Jane Wright, senior analyst and engagement manager for security at TBR. “Its consumer business (Norton), however, will continue to decline.”

To achieve faster growth in the remainder of 2015, Symantec will narrow its focus on a reduced set of use cases for its security products, such as promoting its traditional endpoint malware prevention products as a cloud-based service, while expanding its managed and professional security services offerings.

TBR also believes Symantec will announce additional security professional services in the next few quarters, expanding on its recently launched threat advisory and incident response retainer services. The expanded services portfolio will position Symantec to compete more aggressively against professional services capabilities from FireEye (with Mandiant), IBM and HP.

Once the sale of Veritas is completed, TBR believes Symantec may continue to prune the company, spinning off or selling the Norton business in late 2016 or in 2017.

“While the data collected from millions of consumer devices gives Symantec wide visibility into the threat environment, TBR believes this differentiation does not fully justify Symantec’s extensive investments and other resources required to drive growth in the Norton business,” Wright concluded.

Meanwhile, Symantec expects $6.3 billion in cash proceeds from the Veritas sale, which should close at the end of the fourth quarter, and said it has added $1.5 billion to its share-buyback program.

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