Symantec Selling Veritas: End Of An Acquisition That Never Lived Up To Promises
Joseph F. Kovar
|Veritas' Matt Cain|
Veritas will soon be the newest startup in the data protection market it dominated for decades, both as an independent storage vendor and as part of Symantec.
Symantec on Tuesday surprised no one by revealing its plans to sell its Veritas business to a group of outside investors, closing the door on a long, sometimes painful journey as a single company since Symantec's 2005 acquisition of Veritas.
That acquisition, which promised to bring two of the hottest IT technologies -- storage and security -- into a unified offering ended up with two companies that for the most part shared little more than a corporate structure.
Symantec on Tuesday confirmed July reports that it is selling Veritas to a group of outside investors, including the Carlyle Group, Singapore-based GIC and others, for $8 billion -- far below the $13.5 billion Symantec paid for Veritas Software 10 years ago.
Symantec on Tuesday also reported revenue for its first fiscal quarter 2016 of $1.499 billion, down 14 percent from the $1.735 billion it reported for its first fiscal quarter 2015. The company earned $117 million, or 17 cents per share on a GAAP basis, in the first quarter, down about 50 percent from $234 million, or 34 cents per share. On a non-GAAP basis, first quarter earnings were $275 million, or 40 cents per share, down from $313 million, or 45 cents per share, in the prior year.
For its information management business, which substantially makes up what will be known as Veritas, the company reported first fiscal quarter revenue of $587 million, down 10 percent from last year.
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Ironically, the fact that the legacy Symantec and legacy Veritas business never really did merge appears to be making the process to split the two easier than it might have been.
For Symantec, it was obvious that the two businesses were diverging, said Matt Cain, chief product officer of Mountain View, Calif.-based Symantec.
"When we did a strategic analysis of the company, it became obvious quickly that the focus on data management and security were diverging quickly," Cain told CRN. "This was more of a market-driven trend than anything related to the history of the company. We're focused on the future and on the improved results we've seen."
The split into Symantec and Veritas is a good move for the channel, said Kurt Klein, CEO of CMT, a Santa Clara, Calif.-based solution provider and long-term Symantec and Veritas channel partner.
The separation of Veritas into a separate company means a new focus on the data protection and data management side of the business, Klein told CRN.
"From everything we've seen about the portfolio, the strength of it, we know the Veritas side is the biggest fit for us in terms of its software and appliance offerings," he said.
The fact that Symantec is being forthright about its plans to divest of Veritas by Jan. 1 with its sale to the investors is important, Klein said.
"The Carlyle team is great, and [soon-to-be Veritas CEO] Bill Coleman has done amazing things," he said. "It's also exciting to see the acceleration of the split via the sale rather than waiting for an IPO."
The fact is that Symantec and Veritas have essentially remained two separate companies despite the acquisition, said John Woodall, vice president of engineering at Integrated Archive Systems, a Palo Alto, Calif.-based solution provider and longtime Symantec and Veritas channel partner.
"The numbers tell a sad story," Woodall told CRN. "Symantec paid $13.5 billion for Veritas in 2005 dollars, and is selling it for $8 billion, for basically the same products and services. I never saw the value in the acquisition to begin with. They were two very different companies with two very different target customers and two very different stories. And I don't think they were ever able to leverage economies of scale."
Veritas, however, will shine as a separate company, Woodall said.
"Carlyle has the money to make this work," he said. "The Veritas people I know are reinvigorated to see the company come back. I will be interested in seeing the strategy and pace of innovation at Veritas."
Veritas, to succeed, will have to talk about its information fabric strategy, Woodall said. "If it can flesh out the fabric, and clarify how it works with software-defined data centers, that's important."
Klein said he hopes to see Veritas quickly be clear on its technology plans. "How they will strengthen their cloud message and technology to give customers and partners choices from on-premise and off-premise storage," he said.
While there are today more options for data protection and data management than when Veritas was acquired by Symantec, the fact is the industry still very much needs Veritas, Klein said.
Symantec previously built a global channel across both Symantec and Veritas, but has already separated the sales teams and programs, said Brett Shirk, Veritas executive vice president of worldwide sales.
Veritas has been culling many of the volume-focused partners who worked directly with the company and moving them to its distribution partners, including Tech Data, Ingram Micro, Carasoft and Avnet, Shirk told CRN.
"We are now focused on managed partners who do 85 percent of our channel business," he said.
Veritas' goal is to eventually have about 85 percent of its business go through indirect sales channels, Shirk said.
"Veritas offers very relevant technology," he said. "Also, look at its installed base. A lot of people have invested in Veritas. Look at our Veritas installations. It's rare when we just do Veritas. Veritas is part of other solutions. And customers tell us that Veritas is still a major part of their strategy to protect and secure their data."
PUBLISHED AUG. 11, 2015