Symantec to buy Veritas Software for $13.5 billion
SAN FRANCISCO — Computer security giant Symantec Corp. is buying storage and backup program specialist Veritas Software Corp. to create the world’s fourth largest software maker, marking the latest merger in an industry trend that’s expected to compress the competition to a few juggernauts.
The all-stock acquisition, announced Thursday, was initially valued at $13.5 billion, but the price quickly plummeted amid investor worries that the deal signals a sales slowdown at Symantec, the maker of the popular Norton-branded software that fights computer viruses.
Even as the stock market puzzled over why Symantec decided to branch outside computer security to buy a slower growing company in Veritas, some analysts praised the deal for creating a more diversified firm better equipped to compete with the likes of Microsoft Corp. and IBM Corp.
With the Veritas purchase, Cupertino, Calif.-based Symantec hopes to create a one-stop shop that guards against computer viruses and ensures the reams of vital information stored on corporate networks remains accessible.
Both specialties are in high demand as computer hackers become more proficient in exploiting flaws in Microsoft’s Windows operating system and computers become the indispensable information hubs of businesses and households alike.
“This is a profound event for the entire industry,” Symantec CEO John Thompson told analysts during a Thursday conference call. “I think together we will become a very powerful company.”
Investors aren’t convinced. Symantec’s shares plunged $2.25, or 8 percent, to $25.13 during Thursday’s trading on the Nasdaq Stock Market, where Veritas’ shares fell 12 cents to $27.99. The decline shaved about $1.1 billion from the deal’s initial value.
American Technology Research analyst Donovan Gow said the market’s negative reaction stems from perceptions that Symantec’s acquisition is being driven by a weakening sales outlook for its security software. Those jitters have been amplified by Microsoft’s expected expansion into the market with its own antivirus program.
Thompson, who will run the combined company, tried to allay the concerns Thursday. “This is not a defensive move by any stretch of the imagination. It’s an offensive move,” he told analysts.
After the deal closes in next year’s second quarter, Symantec expects to have annual revenue of $5 billion. The only software makers with a higher sales volume are Microsoft, Oracle Corp. and Germany-based SAP.
The deal marks the second blockbuster merger of major software makers this week — a phenomenon widely expected to continue as companies try to adapt to a maturing industry and cater to their customers’ desire to deal with fewer vendors.
The competitive pressures are expected to force high-tech companies to pair off with a compatible mate or risk being trampled by deal-hungry powerhouses that gain more customers and more financial clout with acquisition.