Symantec, Veritas merger catches industry by surprise

Symantec Corp. and Veritas Software Corp. might have a hard time convincing industry insiders that their rumoured merger will be relevant to customers.

“I would say this merger is in pursuit of an imagination of a customer rather than a real customer,” said William Hurley, senior analyst at the Enterprise Application Group in Portland, Ore.

Industry insiders were caught slightly off-guard Tuesday morning by reports from the New York Times that Symantec Corp. is in talks to purchase Veritas Software Corp. for an estimated US$13 billion. The report also indicated that issues still remain that the two firms need to work out before the deal can be finalized — if it is finalized at all.

Symantec’s products include a roster of security, firewall and antivirus software and it plays primarily in the small- to medium-sized (SMB) market, Hurley explained. In comparison, Veritas is very much focused on enterprise-level clients with its lineup of data protection, storage and server automation, application service management and clustering offerings.

While Hurley said Symantec has been active on the management side by partnering with system management vendors such as BMC Software Inc., Hurley thinks a merger with Veritas is not the right strategy in this case.

“Certainly a robust partnership would have made more sense,” he said. “Symantec has some interesting identity management and change management products and patch- and virus-updating tools, but an alliance or strategic partnership [with Veritas] is more wise in bringing confidence to the customer than an out-and-out merger.”

Hurley said security management, Symantec’s forte, is being equated to risk management. The issues users have in managing storage securely are relevant in terms of managing risk, but do not equate to a security challenge, he added.

“[Symantec and Veritas] conceived that a customer would want all these things in one but I think the end-user sees these as complementary but distinct classes of functionality,” Hurley said.

Additionally, Hurley is concerned that Symantec’s lack of experience in the enterprise space will hurt Veritas enterprise-level customers.

Corporate Snapshot

Veritas sells backup, archiving and file system software. The company is based in Mountain View, Calif., and has around 6,700 staff in 40 countries, according to the company’s Web site. Symantec sells software to protect computer systems and networks, including firewalls and tools to detect viruses and network intrusions. Its 6,000 staff are managed from Cupertino, Calif.

“For these two companies to merge — with Veritas as the acquired — would cause me a bit of pause, particularly if I was an enterprise customer,” he said.

Symantec may be trying to bulk up its enterprise software business, as it watches Microsoft Corp. begin to play a more active role in the consumer security software business, said Mateo Millet, an analyst at Avian Research LLC, in Boston.

Symantec has a number of data backup and recovery products, including its LiveState line of server and desktop recovery software, that could mesh with Veritas’ technology. Symantec planners have also been edging into the storage market, with acquisitions like the December 2003 purchase of PowerQuest Corp., which made storage management software and services.

“Storage and security go well together. They’re trying to diversify in the enterprise space and build that business,” Millet said

One customer, however, is adopting a wait-and-see approach.

Michael Smith, director, data utility at Teranet Inc. in Toronto, was surprised to learn of the possible merger this morning. Teranet uses Symantec’s Norton antivirus on both its desktops and its servers, as well as using Veritas’ Volume Manager and NetBackup for at least the past five years.

He doesn’t share Hurley’s concerns that the merger could hurt his firm’s relationship with Veritas or the quality of Veritas’ products.

“From our point of view, we don’t expect to see any difference. I expect it to be business as usual,” he said. He said Teranet will simply wait to see what emerges if the takeover occurs but has no plans to stop using products from either vendor.

— With files from IDG News Service

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