Symantec just announced that it will divide itself into two.
This follows news that eBay and HP who are doing the same.
One of the companies will take Symantec’s security business, which generated revenues of $US4.2 billion in fiscal year 2014.
The other will focus on what it calls the “Information Management” business, which deals with storing and protecting documents (backup and recovery; archiving; eDiscovery; computer storage software). It generated $2.5 billion in fiscal year 2014.
For now Symantec says its current (and fairly new) CEO Michael Brown will become CEO of the security company. John Gannon is being tapped to lead the new information management business, but the company isn’t calling him CEO. His title is for now “general manager.”
Symantec has been struggling for a while. In March the company appointed board member Brown as interim CEO and in September made the CEO title official. He joined the board in 2005 when Symantec bought Veritas Software in a $US13.5 billion stock transaction. That purchase is what moved Symantec into the “information management” business in the first place.
Symantec’s stock has traded mostly under $US25 for the past five years, at times dipping below $US15. Investors seem to like the news. The stock is up slightly in after-hours trading to around $US24.
Symantec (NASDAQ: SYMC) announced that its Board of Directors has unanimously approved a plan to separate the company into two, independent publicly traded companies: one business focused on security and one business focused on information management (“IM”). Symantec’s decision to pursue a separation follows an extensive business review of the company’s strategy and operational structure. Creating two standalone businesses will allow each entity to maximise its respective growth opportunities and drive greater shareholder value.
“As the security and storage industries continue to change at an accelerating pace, Symantec’s security and IM businesses each face unique market opportunities and challenges. It has become clear that winning in both security and information management requires distinct strategies, focused investments and go-to market innovation,” said Michael A. Brown, Symantec president and chief executive officer. “Separating Symantec into two, independent publicly traded companies will provide each business the flexibility and focus to drive growth and enhance shareholder value.”
The separation will allow each company to:
- Focus on its unique growth opportunities, R&D investments, and go-to-market capabilities
- Reduce operational complexity
- Enhance strategic flexibility, pursue partnerships, and develop independent M&A strategies
- Set distinct capital allocation policies
Mr. Brown continued, “Taking this decisive step will enable each business to maximise its potential. Both businesses will have substantial operational and financial scale to thrive.”
Symantec is a trusted leader in security with leading overall market share — twice the nearest competitor — in a market projected to reach $US38 billion in 2018. The company’s security business sees more, analyses more, and knows more about security threats than any other company in the world.
Its unified security strategy has three primary elements:
- Deliver a unified security platform that integrates threat information from its Symantec products and Norton endpoints to generate more intelligence and telemetry, and integrate this threat information in a big data platform for superior threat analysis.
- Grow its cybersecurity service capabilities across managed security, incident response, threat adversary intelligence and simulation-based training for security professionals. This is an enormous growth opportunity as managed security services is projected to be a $US10 billion market by 2018 growing at a 30% CAGR from 2013 to 2018.
- Simplify and integrate its security products portfolio by consolidating its Norton products to one offering and by extending its ATP and DLP capabilities into more of its products to maximise protection in each of its enterprise access points: endpoint, mail, web and server gateways. The first offering in this series will be an ATP threat defence gateway that Symantec expects to introduce by the end of this fiscal year.
The security business generated revenue of $US4.2 billion in fiscal year 2014. The security business will include: consumer and enterprise endpoint security; endpoint management; encryption; mobile; Secure Socket Layer (“SSL”) Certificates; user authentication; mail, web and data center security; data loss prevention; hosted security; and managed security services.
Information Management Business
Symantec’s IM businesses compete in markets that were $US11 billion in 2013 expanding to $US16 billion by 2018. Its IM business is a market leader, serving 75% of the Fortune 500. The company’s appliance products are outpacing the industry with 27% year-over-year growth, while its backup products rank first in the industry. The IM business will allow organisations to harness the power of their information to enable highly informed decision making, no matter what system it resides on.
The information management strategy will do three things to realise this vision:
- Innovate across its best-in-class portfolio of solutions to provide resilient, reliable foundational products for its customers’ information management strategy. This will allow the IM business to deliver capabilities to its customers however they want to buy, whether it’s on premise software, integrated appliances or in the cloud. For instance, the recently announced NetBackup 5330 Integrated Appliance doubles the capacity and performance of its industry leading appliance family.
- Deliver solutions that dramatically reduce the Total Cost of Ownership of storing, managing, and deriving insights and business value from information and in the process help customers reduce the unmanaged proliferation of redundant and unused data. For example, the IM business will be delivering new integration with cloud providers that enable customers to help manage data across public and private clouds, such as cloud connectors for NetBackup and Recovery-as-a-Service (RaaS) for Azure Cloud.
- Enable visibility, management, and control across an organisation’s entire information landscape through an intelligent information fabric layer that integrates with its portfolio and third-party ecosystems. Next year, this capability will allow customers to view a map of their information, including Personally Identifiable Information (PII), to reduce the risk that their confidential and sensitive information is compromised.
The IM business generated revenue of $US2.5 billion in fiscal year 2014. The Information Management business will include: backup and recovery; archiving; eDiscovery; storage management; and information availability solutions.
Michael A. Brown will be the President and CEO of Symantec and Thomas Seifert will continue to serve as CFO. John Gannon will be General Manager of the new information management business and Don Rath will be its acting CFO.
Gannon served as President and COO of Quantum. Prior to Quantum, he led HP’s commercial PC business. Rath joined Symantec in August 2012 and previously held senior tax and finance roles with Synopsys, Chiron and VERITAS.
The transaction is intended to take the form of a tax-free distribution to Symantec shareholders of 100% of the IM business in a new, independent, publicly traded stock. The expected stock distribution ratio will be determined at a future date. The company expects to complete the spinoff by the end of December 2015. We expect to incur separation and restructuring charges through the completion of the transaction as we work to separate the two businesses.
The proposed separation is subject to customary conditions, including final approval by the company’s Board of Directors, the effectiveness of a Form 10 filing with the Securities and Exchange Commission, and satisfying foreign regulatory requirements. There can be no assurance that any separation transaction will ultimately occur and, if one does occur, there can be no assurances as to its terms or timing.
J.P. Morgan Securities LLC is serving as financial advisor to Symantec.
Business and Quarterly Outlook
Symantec reiterates the September quarterly guidance as stated on its August earnings call. The company intends to provide more detail about the quarter on its November 5th earnings call.
Business Insider Emails & Alerts
Site highlights each day to your inbox.