Veritas CEO Explains Logic Behind Symantec Merger

Veritas Software CEO Gary Bloom, who's set to become Symantec's vice chairman after the two companies' merger deal closes, has one eye on the present and the other on a promising vision of the future. This week, Veritas launched Backup Exec 10 for Windows, which allows solution providers to better help customers handle data management and compliance. In an interview with Editor In Chief Michael Vizard, Bloom explains the short-term opportunities around backup for partners and expounds on the factors that drove the merger with Symantec, where he also will be responsible for all customer-facing sales activities, including the channel.

CRN: How far along are you in terms of thinking through the channel strategy for the combined Veritas-Symantec?

BLOOM: We haven't figured that out yet. That's part of the sales integration effort that we have going on, and we'll be working with Bain and Co. to sort that out. When it comes to sales, and the channel in particular, we can't have that many discussions until the deal actually closes. But how we approach, say, a Fortune 50 company and a small- to medium-enterprise company is probably going to be different. There's probably going to be more opportunity to consolidate relationships at the high end--although if you look at the channel, most of the partners already sell products from both companies. The channel partners will be looking for consistency in relationships from both companies.

CRN: Given that, are you doing anything to provide incentives to keep key people in place during this process?

BLOOM: Of course. That's a standard part of integration planning. By and large, employees on both sides have embraced the transaction. They get the strategic nature of it. This is not a deal like IBM and Lenovo, where you have billions of dollars in cost synergies, or Oracle and PeopleSoft, where it's about all the layoffs. This is about combining two great assets--not gutting one of them, but leveraging each other to solve bigger problems for customers. Fundamentally, the messaging is quite different. This merger is completely different from any of the other comparisons you could make. We and Symantec have a history of each doing acquisitions where we keep the employees.

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CRN: Wall Street's reaction to the Veritas-Symantec deal seems to be lukewarm. Why do you think that's the case?

BLOOM: Wall Street typically evaluates mergers and acquisitions on cost synergies, and they typically dismiss or discount revenue synergies. We've come out and said this is not about expense synergies. We've also said that we would not get ahead of ourselves and create artificial targets to meet. From a technology and customer perspective, this transaction makes sense. The strangest part about the Wall Street reaction is that our customers like it, our employees like it and our partners like it. Last I checked, those are the people that create, sell and buy the products. If they all like it, that suggests lots of revenue opportunity, which is ultimately what Wall Street will measure us on. What they are having trouble digesting is that they've never seen two leaders coming together. They are trying to make assumptions that this was some act of desperation or a signal of some weakness on one side or the other. In fact, this is two strong companies getting together.

CRN: Another view of the merger might be that neither company has enough clout or size to truly compete in the enterprise market. Did that factor into the merger thinking?

BLOOM: That's the glass-half-empty view of it. The glass-half-full view is that we are both successfully addressing the market, from consumer to enterprise, but together we're stronger. We certainly get more enterprise capability together, and we solve bigger problems for customers.

CRN: How did the merger discussions actually come about?

BLOOM: On an annual basis, both companies do a refresh of their strategic plans. We go through all our strategic options. As part of that, we've always looked at whether we would be better off being part of somebody else. But good companies don't sell out; they merge for good, strategic reasons. If you rolled back the clock a year or two, Symantec was on our charts. If you roll back the clock on Symantec, Veritas was on their charts. Both of us were seeing a convergence in this space.

If you take information security and information availability, the notion that those are two critical components that need to come together is clear. Over the course of time, we started partnering together, we started competing for the same executives, we started competing for the same mergers and acquisitions. We watched them acquire On Technology and PowerQuest, which were interestingly close to what we were doing. We then saw them launch their Information Integrity architecture, which if you take as a concept and superimpose utility computing on top of it, you would not see a material difference. If you pardon the pun, the semantics may different, but the problems we were each trying to solve were uniquely similar. When [Symantec CEO] John Thompson and I got together to touch base on the market, John posed the question, 'What if we put these two companies together?' The question was, 'Is there a strategic opportunity to do something different here?' We concluded this makes a tremendous amount of sense and that we could make the math work. Our view is that owning 40 percent of this combined entity is far more valuable than owning 100 percent of Veritas. And the Symantec board also concluded that owning 60 percent of a combined entity was more valuable than owning 100 percent of Symantec.

CRN: How would you say your approach to utility computing is different from what every other vendor is talking about?

BLOOM: Our approach is around building blocks that enable people to do utility computing. What you're hearing from everybody else is that the customer has to buy it all from them, rip and replace everything they've got and then they, too, can have utility computing. We're saying utility computing is something you evolve to over time. We'll take your heterogeneous environment and start giving you the infrastructure tools to be more efficient. And when we put the company together with Symantec, we begin to talk more about performance automation, availability and security. We also add the network layer to make a much broader solution. But it's a building-block approach where you can run as much or as little as you want to get the incremental benefits. In contrast, the IBM E-Business Suite only works if you're all Oracle applications. But very few people run all Oracle applications.

CRN: Both Veritas and Symantec talk a lot about policy management. Is that the new superset category for systems and network management?

BLOOM: It's the rules under which you operate IT. It's about your security policy, your compliance policy, and your backup and recovery policy. The question is, can we lead the market in terms of automating those policies?

CRN: Regarding the new release of Backup Exec, it seems like you are trying to guide your partners toward providing more consulting services, rather than just selling software. Is that the case?

BLOOM: It's less about us telling them than us listening to them trying to tell us what they are trying to do. The product is all about meeting the customer requirement, and the customer problem is bigger than just backup. It's about how you do contingency planning and data protection, how you deal with remote locations, how you deal with laptop data and how you drive the costs of doing that. Customers are putting those same requirements on the channel partners in terms of asking them to help them do this. What we're doing is giving the channel partners a solution that solves a much bigger problem. For them, it equates to a very a nice upsell opportunity to solve a bigger problem and be more strategic with customers. It allows them to get involved with their customers' IT architecture and data management vs. just sending them a box of software for backup. This product takes some of the ancillary assets that we have either acquired or built over the years. The Storage Exec product, for example, was part of our acquisition of Precise. Now we're putting that into a bundle with the right kind of administration capabilities to meet the market requirement. That's why the partners are excited, because they see a product that targets the market they are trying to address.

CRN: EMC is making a lot of noise about their software plans. What's your take on them as a competitor?

BLOOM: I like having EMC as a competitor. We do very well against them. EMC has acquired a large number of software companies that try and compete with us. But I've seen no discernible shift in market share, based on their efforts. Legato was the No. 4 product in the market when they bought it, and it remains the No. 4 product. In my view, it's never going to be No. 1, 2 or 3. Dantz, meanwhile, was built primarily for Macintosh backup. It's a low-end product. I don't know how Dantz becomes an actual competitor to us, given our market reach and everything else. And now we have the Quickstart program where our software gets bundled into the products and, with the Symantec merger, we pick up a consumer channel that could also allow us to go downmarket. I think that's something pretty viable for us to do. But it wouldn't have made sense for Veritas to try and do that without a consumer channel. EMC also bought Documentum, but there are lots of companies that sell document management applications as there are companies that sell general ledger software. I just don't get the difference between managing documents and managing general ledgers. The UI for those applications is important to users, but that has very little to do with the underlying infrastructure underneath those applications in terms of getting rid of cost and complexity. What we are ultimately doing is solving the cost complexity and compliance requirements for customers.

CRN: What do you think of IBM as a competitor?

BLOOM: We both partner and compete with them. The main area where we compete, or what I call the off-limits area for partnership, is the backup and recovery market. We have roughly 50 percent market share, while they have TSM with a little bit less than half of that. They are the No. 2 player in the market. That's what is funny when people ask me about EMC as a competitor. That's not my real concern in life. My concern is what is Computer Associates is doing in the Windows market and what IBM is doing in the Unix market. And in the Unix market, we're starting to see some fracturing of the hold that IBM has on large Unix accounts. And we're seeing more TSM replacements and standardization in mixed environments on our products. Our products have a much lower cost to administer and much more success recovering data.

CRN: Now that CA has new management, how big of a threat are they?

BLOOM: I don't ignore any competitors, big or small. I take a very practical view of it. And the one thing CA can't do compared to Symantec and Veritas is be out there with the leading products. We're the market-share leader in six or eight different categories of technology. It's much easier to compete from a position of leadership than from a position of No. 3 or 4.

CRN: Does Veritas need a Linux-based offering for the SMB market beyond allowing those systems to back up files to Windows servers?

BLOOM: We have NetBackup that already runs in the Linux environment. But most Linux deployments are in enterprise accounts. Small to medium businesses are not experimenting with Linux today. They are running Windows solutions. As much as Linux becomes a more popular trend, we'll watch and see what the product requirements might be in that area. We have all the assets to go do that.