Symantec-Veritas Combo Could Form Data-Protection Giant

According to a New York Times report Tuesday, Symantec is in advanced negotiations to acquire Veritas for more than $13 billion, nearly a 20 percent premium over its Monday closing price of $25.19 per share. Officials at both companies declined to comment, but news of the report drove Veritas' shares up 8.7 percent Monday, while dragging Symantec shares down more than 16 percent.

Yet despite the market's cool reception to Symantec's overture, the combination of Symantec and Veritas would provide a broad portfolio of security and data-protection solutions, which increasingly are becoming complementary parts of data-center protection environments of all sizes. After acquiring storage vendor PowerQuest last year, adding Veritas would make Symantec an even more formidable provider of storage and data-protection software, giving it a much broader suite than rivals Trend Micro and McAfee. And a Symantec-Veritas combination would further pit the new company against CA and IBM, which both count systems management, storage and security software among their offerings.

Both Symantec and Veritas have looked to broaden their partner bases this year, both rolling out major initiatives to recruit solution providers who can serve the SMB segment. In many cases, Symantec and Veritas have the same partners, such as Philadephia-based Cordicate IT. Managing sales director Stephen Oles says he believes that Veritas could actually benefit by having a corporate parent better able communicate the breadth of products Veritas offers.

"I don't think Veritas does a good job of telling their customers of all the products they have," Oles says.

In terms of how partners view both companies overall, Veritas and Symantec both posted similar scores in this year's VARBusiness Annual Report Card. But in the security-management software category, Symantec came in fourth over CA, Cisco and Trend Micro, while Veritas came in second in the storage-management category to IBM's Tivoli.

Yet what remains to be seen is whether another player will sweeten the pot, leading to a bidding war for Veritas, whose backup and replication products are the cornerstone of large enterprises.

"We believe there is an increasing chance that another company may bid on Veritas' shares," wrote Merrill Lynch analyst Shebly Seyrafi in a research note released Tuesday. Seyrafi said other potential bidders are EMC, Hitachi, Microsoft, IBM and Oracle. Oracle would be particularly remarkable considering the fact that it just reached an agreement to acquire PeopleSoft Monday for $10.3 billion, a significant premium over its original hostile offer more than a year ago. Seyrafi noted, however, that Oracle, in the view of CEO Larry Ellison, is the "primary consolidator in the software industry."

As for other potential bidders, Seyrafi opined that Veritas would give EMC the ability to obtain 30 percent of its revenue from software; give Hitachi a much-needed boost in its software pipeline; and give Microsoft a high-end alternative to its forthcoming Data Protection Server.

Cordicate IT's Oles says he would be more concerned if a hardware vendor like EMC, IBM or Hitachi were to acquire Veritas because the products could be de-emphasized or be tailored to specific systems.

"We spent a lot of time and money to get authorized for Veritas, and I hope [if anyone acquires them it] doesn't dilute the value a company like ours brings," Oles says.