The VARBusiness Interview: Veritas CEO Gary Bloom On the Symantec Merger

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VB: Just two weeks after announcing the merger with Symantec, Michael Sotnick [Veritas' vice president of partner sales] left [to take a position at SAP]. One might say that's not a good sign of things to come.
Bloom: People have careers, and they manage their careers, and sometimes they decide to go off and do something different. We were fortunate Mike Sotnick was here for a long time; he did a lot of good things for the company and for the channel. We have a lot of talent in the company. He didn't go off to a competitor, which I wouldn't have expected him to do. He went off because he wanted to do direct sales.

VB: Doesn't this fly in the face of your statement that you are looking to retain key executives?
Bloom: It only flies in the face of it if you assume between Dec. 16 and Jan. 1 he panicked and ran out the door to look for a new job, and I don't think that was the case.

VB: You have a pretty big integration going on, and you want to keep both channels happy. Doesn't this create a speed bump?
Bloom: You could view it as a speed bump, or you could view it as a meaningful opportunity to engage with your partners and have a meaningful dialogue. Likewise with our customers. The merger becomes an opportunity to have a sales call with every one of our customers. They want to hear about the biggest merger in the software industry. I equate that to a sales call. I see the relationships with the partners in the same way.

VB: Will the Veritas brand remain alive inside of Symantec?
Bloom: The name of the company will be Symantec. If you look at their strategy of branding products, they brand products from the perspective of where came from. For example, it's still Symantec Norton AntiVirus. Well, Peter Norton was not Symantec. It has cache, and it has brand recognition. So what will happen with the Veritas products is the Veritas product names will continue. We're not going to rename the Veritas File System to become the Symantec File System. The other thing we are not doing is we're also not running it as "Veritas, a Symantec Company." We think the real opportunity here is let's bring the opportunity together, leverage each other's strengths and build the best possible company we can. You don't do that by having two separate operating units under a common umbrella.

VB: Is there a lot of overlap among the Veritas and Symantec partner bases?
Bloom: We don't have a lot of studied data, which we can't do, because we have to run as independent companies. There hasn't been a lot of detailed analysis. [That said], I do think there's a lot of overlap. We both do very well in the small and medium enterprise, and we have very comparable capabilities in that market, and that's been a big market for us. We move a lot of product through that channel -- it's virtually 100 percent channel fulfilled. We don't have a lot of inconsistency or a lot of contention there. They have a consumer channel we don't have. So, obviously, is there a backup opportunity in the consumer market? Yes, they are already working on a [backup] product, and their plan was the fall time frame. We obviously have a few more assets to bring to the table around backup software, and I don't think a lot of what you saw here today will go down market if we didn't have the channel. If you move up to the enterprise resellers, in Europe and Asia, I would say we have the same kind of consistency and healthy relationship that Symantec has. And in the U.S., we have a little more contention in the channel partner base around consistency with the enterprise resellers, and, as you know, it's an up and down thing. But Symantec has kind of nailed that. They have great consistency, and we have something to learn from their consistency model. It's going to be a good, positive synergy in the channel base. VB: That said, you've spoken on a number of occasions about the fact that partners are very bullish on the merger, yet there are a number of reports that put that into question. [We] have one report from Baird, where they said 33 percent were positive about that, 26 percent were negative and 41 percent were neutral.
Bloom: How many did they talk to, five?

VB: Actually, 46 partners with $6.6 billion in revenue. And of those same VARs, 48 percent don't believe Veritas will be able to hold its market share in the backup market.
Bloom: We've had people predicting our loss of market share for the entire four years I've been with the company, and it starts sometime before that. We heard for the first three years I was here how CA is attacking our channel, and they are going to take all of our channel business away, and on the close of the EMC-Legato acquisition that they were coming after our channel. And strangely every year we've grown market share. So, for me, the numbers speak for themselves. With CA, during one of the three years of their attack, we gained 13 points of market share, and the following year we gained 11 points. So I hope they keep putting on the offense here. This is like coming after the New England Patriots.

VB: When you have a strong contingent of VARs on that level, raising those kinds of questions, how do you intend to address that?
Bloom: I don't know how to look at these surveys -- I don't know who these surveys talk to. Are they talking to the channel manager from Veritas, who thinks they might lose their job because Symantec is buying Veritas? Or are they talking to the executive at the firm that's making the business decision that they are going to strengthen and double down on a relationship with the combined company? What [I've] heard from some of the biggest resellers in the market is, "How can we be helpful?" We welcome that input because we want to get it right. The other thing I would raise with you is the practical side of it: We lead in data protection, we lead in storage management, and we lead in high availability. Symantec leads in antivirus, antispam and security. So I just don't understand how 67 percent from your survey think they are going to win in the marketplace, partnering with somebody other than the leader. It's much easier to sell leading technology than losing technologies. I don't want you to take it in the wrong way -- we have to have a good business relationship with these people, and by and large we do, but the reality is it's much easier to sell leading technologies.

VB: Why is Wall Street so skeptical about this deal?
Bloom: I don't think they understand it yet. I think they are still grasping, trying to get their arms around it. We talked on our Webcasts on our road trip that John Thompson and I did. One of the analysts said the problem with this on Wall Street is it's a purple elephant. We said, "What do you mean, a purple elephant?" He said, "I've never seen one before, I don't know how to evaluate it." They've never seen in the software industry, two leaders that both had a very strong, independent path come together, unify their businesses and say we can solve customer problems, create more shareholder value being together than we can separately. All they've ever seen is big companies buying small companies, successful software companies buying broken software companies, more and more recently, big software companies stomping out a competitor. They haven't seen two large enterprise software companies come together that says we are going to go from being both in the $2 billion plus revenue range to ultimately becoming a $5 billion-plus entity growing at 18 percent, which is almost twice as fast as any of the other $3 billion-plus software companies. It's going to be a company with phenomenal assets. We've never seen that in the software industry. We've seen it in the oil business. I was part of the Chevron Gulf merger, as a systems programmer, merging IT systems together. We weren't exactly the welcome guests at the refinery. So other industries have seen this, but the software industry has not. VB: So what's your response to the purple elephant?
Bloom: We just have to keep educating them on what the No. 1 problem customers have, which is security. What's the No. 2 problem they have? Their data and information and protecting it. If you take information availability, and information security, and you put those two things together, you're addressing the top requirements a CIO has.

VB: How quickly are you going to move to bring the best of the technology and R&D from both companies together to, for example, bring the LiveUpdate function into Backup Exec?
Bloom: Well, I don't know if you'd necessarily do LiveUpdate for Backup Exec. Would you allow a security vulnerability to trigger alternate behavior in your backup products? That would make sense. Symantec on average knows six days before a vulnerability hits. So why don't we start changing the backup methodology, why don't we change the schedules? If you're not doing continuous backup, why wouldn't you turn that on, even if it causes you some network issues? Hours before a major failure in an enterprise, why wouldn't you fail over to a secure network or your system to avoid a certain area of the network that's been polluted by security issues? There's lots of opportunities for linking. When you talk about those product bundles, what you can envision pretty early in the merger is what I call loosely coupled bundles, meaning do we package it, bundle it, have an incentive in the channel and for customers that by buying the combination you get an advantage? That could come very quickly, as you would expect. How soon can we have a common installer and common user interfaces? That's probably six to nine months, maybe a little longer, maybe a little less. How long will it be before there's tight integration down in the guts of the two products? We're talking 18 months out. Organizationally through, it will all come together day 1. The product-line leaders at Veritas, Kris Hagerman, Jeremy Burton and Mark Bregman, will report in, along with the lines of business at Symantec, to Jonathan Schwarz.

VB: Will there be a common partner organization from day one?
Bloom: We haven't sorted out all the go-to-market side of it, but I'd expect if you're CDW or Ingram Micro, I don't think you're going to want four different people calling on your company. What we're hearing from partners is they see an advantage here of more effort on go-to-market, less effort on relationship management. It consolidates supplier relationships -- one contract dealing with one vendor for a broader product portfolio. In the high-end enterprise, there's a lot of work associates with big enterprise agreements. If the channel partners can get more consolidation, a broader product portfolio from a single solution vendor, then that's better.

VB: While you're well into your thinking and planning on how this merger will come together, let's say tomorrow Carly Fiorina gives you a call and offers you an unbelievable premium over the current offer from Symantec?
Bloom: If you look at the structure of the deal, there will be a shareholder vote on this merger. There's not an alternative for either Symantec or Veritas. This has been characterized to the Street as a very tight merger. It's one that both companies and both boards support; it's the one that we both believe is the best strategic alternative to both companies. If someone comes along with an attempt to disrupt the transaction, we will deal with our fiduciary responsibilities and educate our shareholders accordingly on what that means. We're not planning for that.

VB: Are you comfortable you'll be able to push the [new Backup Exec] suite vs. the standalone version?
Bloom: The answer is we want to do both. We are not asking our customers or partners to sacrifice the capabilities of Backup Exec. Each are excellent standalone products with phenomenal capabilities and features. The way the channel partners responded, at least the ones I talked to, was what a phenomenal upsell opportunity. I want deeper penetration, and I wanted more products from Veritas in the first place.

VB: Could the suite cannibalize the higher end NetBackup product?
Bloom: We don't think so. Even if it does, I'm not concerned about that. What's happening with NetBackup is more and more the battleground there is with IBM at the high end. If there's a cannibalization where enterprise and small, medium business meet, I'd just assume that be my product than someone else's product.

VB: Microsoft. Partner-competitor, Data Protection Server coming out this year or maybe next year?
Bloom: Partner and competitor both. And even with Data Protection Server, we will be a partner and competitor both. They talked a lot about Data Protection Server having some disk-based backup capability, but it's not going to have tape backup capability, from what they've announced. So the question is, will CIOs sleep at night knowing their data is still predominantly sitting on a spinning disk, or will they sleep at night knowing it's on something permanent that can be shipped somewhere else and remotely stored? We'll compete with them, but one of the things we compete with them is you offer a better or broader solution, which is what the Backup Exec Suite is all about.