Competitors: Symantec-Veritas Union Spawns Software Powerhouse But Faces Challenges

unveiled Thursday

An EMC spokesman said ISVs like Veritas have been struggling for relevance with customers looking to work with fewer vendors, so the Mountain View, Calif.-based software firm's absorption into a larger company was inevitable. But because mergers of this scale can be disruptive, Hopkinton, Mass.-based EMC now has an opportunity to expand its storage software business while Veritas and Symantec labor through the process of merging two R&D organizations, management teams and sales forces, he said.

What's more, Symantec and Veritas are merging at a time when their products are becoming commoditized, according to the EMC spokesman. "Symantec's bread-and-butter security products--Microsoft and Computer Associates are commoditizing that product," he said. "And Symantec bought a company that is starting to experience commoditization in the backup space."

The EMC spokesman also suggested that Veritas might slide more toward a direct-sales focus. He noted that Thompson mentioned in his analyst presentation that Symantec is looking forward to working with Veritas' direct-sales force to boost his company in the enterprise space.

Frank Harbist, vice president and general manager for storage software at Hewlett-Packard, called the acquisition good for HP's StorageWorks product line. "Veritas has been a very good partner for StorageWorks for a long time," he said. "This creates a stronger partner for us."

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It's also good for the industry, Harbist added. "It will create a stronger independent software vendor and give other ISVs a stronger company to partner with," he said.

Computer Associates International, Islandia, N.Y., so far has trumped pure-play security rival Symantec with its integrated eTrust line of products, which offer tools to back up data based on threat levels--similar to the strategy Symantec will pursue with Veritas. Still, a CA spokesman said his company's Unicenter infrastructure management software keeps it one-up on Symantec.

"What this really represents is a validation of CA's own model, where storage and security are integrated. What Symantec doesn't have yet is the middle piece: IT management," the CA spokesman said. "That's where CA has the advantage."

The merger of data management and security provides a compelling solution for customers, according to Paul Albright, senior vice president of marketing at Network Appliance.

"We believe this merger validates the NetApp philosophy that 'specialists win' and represents the market reality that pure-play companies focused on their own core competencies deliver superior customer value," Albright said in an e-mail. "Symantec and NetApp are two specialists in their fields, and we both seem poised to reap the benefits of that specialization."

Other observers, however, were left scratching their heads over the Symantec-Veritas deal. Richard Ptak, principal of consulting firm Ptak, Noel and Associates, said he wondered why Symantec chose to merge with Veritas rather than CA--or, better yet, BMC Software--to gain a broader-based infrastructure management solution.

"This would have given Symantec a solid position as a major player in systems management," Ptak said. "Symantec quite clearly left the door open for further acquisitions in this space, but after they have completed this merger. Given the current trend in market consolidation, it is an open question about which firm will be available when Symantec is ready to move. But we would bet they will acquire again."

Other observers also speculated about which vendor Symantec should have acquired or which company might have been a better suitor for Veritas, citing players such as HP, Cisco Systems, Hitachi and Oracle. In any event, Brian Babineau, an analyst at the Enterprise Strategy Group, a Milford, Mass.-based strategic analysis firm, said talks between Symantec and Veritas go back at least a year, when EMC acquired VMware.

"I believe this has been going on for some time," Babineau said. Hitachi and Cisco would have been a better fit for Veritas, he noted.

One impetus for Veritas to look to be acquired may have been EMC's purchase of Dantz earlier this year, which brought EMC into the entry-level storage software market, said Tom Kuni, president of SSI hubcity, a Metuchen, N.J.-based Veritas and Symantec solution provider.

"When EMC grabbed Dantz, it was a 'scare Veritas' move. It showed that EMC was serious in the entry-level space," Kuni said. With Veritas gone as an independent vendor, that leaves CommVault Systems as a potential acquisition target, he added.

HP's Harbist said he can't comment on whether his company was considering a Veritas acquisition. "But companies as large as ours are always scanning the environment," he said. "And Veritas is an important part of our space."

Steve Hunt, vice president and research director for security at Forrester Research, said the Symantec-Veritas merger could work well for both companies. For Veritas, it opens doors to security revenue while not closing the doors to its existing channel, and for Symantec, it furthers the security vendor's strategy of reinventing itself as a risk management company.

"It is in keeping with [Symantec's] new slogan, 'Keep the business up and running no matter what happens,' " Hunt said. "But to fulfill that, it needs to fill in gaps."

Veritas should be able to take advantage of Symantec's visibility at the enterprise CIO level, according to Hunt. "CIOs know Symantec and feel comfortable with the company. So for Veritas, Symantec is a new channel to the upper management of a company," he said. "And data management is now a fundamental part of risk management. Packing it all together is a very good message, and good for Veritas."

Kuni, a member of Sun Microsystems' VAR council, said he wouldn't be surprised to see an identity management piece brought into the combined Symantec-Veritas. "Sun's WaveSet is the best. [It's] a recent acquisition--one of Sun's best acquisitions in 10 years," he said. "I wouldn't be surprised to see a tighter relationship between Symantec and Sun going forward."