Symantec’s Security and Information Management – Veritas – bifurcation

Symantec is currently the world’s fifth largest software company – miles behind Microsoft, Oracle and IBM in the first 3 positions, but very close to SAP in fourth (see Figure). In the year to the end of June $6.0B of its $6.7B came from software – giving it a 0.7% share of the $886B market. Its net profitability at 15% however was less than each of these competitors.

The software market is too broad and participants too numerous perhaps for vendors to make a full frontal attack to gain share and – although as a category software continues to fare better than hardware, telecom and IT services – success depends on the selection of cool areas to pursue.

Symantec has decided to split itself in 2 – making its Security business a separately traded company from Information Management business, which it is to rename Veritas Technologies Corporation. I think you’ll enjoy my quick look at the repercussions.

It has a strong position in both Security (where it is the market leader) and Information Management software. We took a stab at separating the 2 business lines to show their performance over time in our Figure. Its Norton software has a strong presence in consumer markets, as its cybersecurity offerings do in the business market. Here there’s a shift away from point-products such as firewalls and anti-virus software towards threat-intelligence, proactive protection and other services. As a non-hardware company Symantec should be able to develop its services with a greater independence than IBM, EMC, Dell and HP; like all of them it will need to become more of a services than software player over time.

The new Information Management company has a bigger challenge in competing with newer ‘Software Defined’ companies such as Red Hat and VMware. Today it helps its many customers deal with what they already have (in backup and retrieval for instance), rather than cutting costs significantly by replacing hardware with software. Although Symantec currently plans to split the shares between the 2 new entities I wouldn’t be surprised if this part became an acquisition target.

Symantec has a complicated structure and lacks agility in addressing new opportunities as a result. If handled well breaking the business in 2 will allow it to focus on these 2 very different businesses more successfully.

There is much experimentation in organisational structure in our industry – years ago HP split off from Agilent; more recently Motorola and Siemens exited the ITC market, while Nortel disposed of itself; Apple and Samsung’s success in the smart phone business led to Nokia offloading its phones to Microsoft and Motorola’s – jumping from Google – have found a new home at Lenovo – as has IBM’s System x business; BMC and Dell have both become private companies – removing themselves from the constant spotlight of the stock market to focus on more long-term investments. Symantec’s move shows is different – it’s planning to increase focus, agility and success through separation. It’ll take some time before the deal is completed in December 2015, but we’ll be watching closely to comment on its success.

Further research:

eBay splits

HP splits