Veritas Is Thriving On Insecurity Worries, Data Loss Fears

After that fateful day, Veritas had little trouble persuading businesses of the need to protect crucial data and guard against system crashes--the work of its software storage and backup products.

"We came through with flying colors," chairman Gary Bloom says.

Veritas recovered all the data for all 112 customers affected in New York and Washington, D.C. and people have since packed the company's disaster recovery seminars.

The Mountain View, Calif.-based company has used the seminars to sign up more business customers for consulting services--deals Bloom hopes will lead to more software sales.

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The surge in business after Sept. 11 capped another year of growth for Veritas at a time when most other large high-tech companies shrank. Veritas' revenue rose 24 percent last year to $1.49 billion.

Based on sales, Veritas ranks as world's seventh largest software company, ranking behind Microsoft, Oracle, SAP, Computer Associates, PeopleSoft and Siebel Systems. All of those software giants have built more widely known brands than Veritas, a factor that helps them to make even more sales, says industry analyst Ray Paquet of Gartner in Lowell, Mass.

"Your name certainly doesn't have to be on the tips of people's tongues to make lots of money but if you have good visibility, it can help you open a lot more doors," Paquet says.

It's a factor Bloom is acutely aware of--and something he intends to change beginning at Veritas' customer conference in Dallas, which runs Sunday through Thursday.

"We have never really done a lot of hand-waving," Bloom says. "Now we want it be known that we are an industry powerhouse right up there with the Microsofts and Oracles of the world."

Bloom will be assisted by Jeremy Burton, who helped Oracle elevate its brand during the last few years. A senior vice president at Oracle, Burton was recently lured away by Bloom to become Veritas' chief marketing officer. Bloom himself spent 14 years at Oracle, where he was one of CEO Larry Ellison's right-hand men.

Bloom, 41, learned a lot about marketing from the hyperbolic Ellison, although he says he will never be as flamboyant as his former boss. Nor is Bloom likely to become as rich as Ellison, one of the world's wealthiest men. Bloom, though, made a substantial fortune while at Oracle.

In his last year at the Redwood Shores-based database giant, Bloom cashed in stock options worth $20.5 million. He also collected a $1.8 million paycheck from Veritas last year and received 1 million stock options that will be worth $62.9 million in four years, if the shares appreciate by an average of 10 percent annually.

Veritas reminds Bloom of Oracle during the days when most people didn't realize how crucial the database company's software had become.

"Oracle's software plays a role in running so many different things, but at one time it had a very underdeveloped brand. I see a similar DNA at Veritas," says Bloom, who left Oracle to become Veritas' CEO nearly 18 months ago.

Veritas is the dominant player in backup and recovery software, ending last year with a 41 percent share of a $1.6 billion market, according to Gartner. The company's market share rose from 31 percent at the end of 2000. Its closest competitors are IBM at 21 percent and Legato Systems at 8 percent, Gartner says.

With demand rising for Veritas' products, the company added 800 workers last year and hired another 112 during the first three months of this year. Although Veritas' recent growth rate has outpaced most major tech companies, its stock has been caught in the same severe downdraft that has ravaged the rest of the industry.

Since the end of 2000, Veritas' stock has plummeted by 69 percent to $27.31 as of April 25, wiping out $23 billion in shareholder wealth. The latest blow came in mid-April when Veritas reported a first-quarter operating profit of $66 million on revenue of $370 million, slightly lower than the same time last year but slightly above Wall Street's expectations.

Bloom unnerved investors by warning that Veritas' second-quarter sales will be lower than the first quarter's and declined to make any predictions for the second half because of the muddled state of corporate technology budgets. The conservative outlook prompted analyst Shebly Seyrafi of A.G. Edwards to back off his prediction that Veritas' stock could soon be worth $60 per share. Seyrafi now thinks $45 per share is a more attainable target, although he thinks the company still has a good chance to increase sales by about 30 percent annually for at least several more years.

Veritas also figures to face more competition from hardware giants like Sun Microsystems and EMC, which are invading the company's turf with their own software products.

Bloom views the challenge as further validation of Veritas' rising importance. He remains confident that Veritas latest annual report will be the last to include this line:

"Veritas Software has been called the most successful software company nobody has ever heard of," he says.

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