Article

Veritas users fear rocky roadmap

Jo Maitland, News Director

Symantec Corp. and Veritas Software Corp. today announced that the companies have reached a definitive agreement to merge in an all-stock transaction worth approximately $13.5 billion.

The news of the deal, which broke earlier this week,

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raises some major challenges for the combined company -- the most pressing of all, explaining to users what the benefits of the integration will be.

Financial details

The value of the deal was based on Symantec's stock price of $27.38 at market close on Dec. 15, 2004. Veritas stock will be converted into Symantec stock at a fixed exchange ratio of 1.1242 shares of Symantec common stock for each outstanding share of Veritas common stock. Upon closing, Symantec shareholders will own approximately 60% and Veritas shareholders approximately 40% of the combined company.

The aggregate revenue of the combined company is expected to be approximately $5 billion for fiscal year 2006, which begins in April 2005 and ends in March 2006. Approximately 75% of the revenue of the combined company is expected to come from the enterprise business and 25% from the consumer business. In addition, the combined company will have approximately $5 billion in cash.

The transaction is expected to close in the second quarter of 2005 and is subject to customary closing conditions.

"We have to be crystal clear with our customers on how they do business with the combined entity," said Gary Bloom, CEO of Veritas, on a call with press and analysts Thursday. John W. Thompson, chairman and CEO of Symantec, said the new company must first get its 13,000 employees "jazzed about the prospects" and then pass this on to its customers.

Users voice their concerns

Craig Patterson, IT consultant at Georgia Department of Transportation, has 50 terabytes of data backed up using Veritas' NetBackup. The department is also a major user of Veritas' Volume Manager and clustering software for Windows and Unix servers. "We've never run across a security issue in our storage environment, but down the road, maybe there will be a need to code backups so that no one can break in." His biggest concern about the merger is that the products he buys today from Veritas will change. "I've had experience in the past, with CA buying companies: They integrate the product with something else and it doesn't work as well... so as long as they -- Veritas and Symantec -- keep the two entities separate, it'll be OK," he said.

Bill Brewer, PCS global IT configuration manager at Motorola, is a major user of both companies' products. "Our outsourcing company, Computer Sciences Corp., buys our storage and security -- it's the same company, although not necessarily the same person," he said. As long as the integration of the products is "nondisruptive it should be OK."

Andrew Ferguson, manager, enterprise operations at Brookhaven National Laboratory, questioned which company will provide support going forward. While Robert Stevenson, technology strategist at the Oldsmar, Fla., operations facility of Nielson Media Research, said that even the slightest change to a backup environment can be a huge adjustment for the operational team. "We're watching this very closely," he said.

Product roadmap

Symantec's Thompson said the initial focus of integration will be around automation tasks. "The assets Veritas has through its Jareva and Precise acquisitions will be important," he said. An obvious product coupling would be KVS, the e-mail archiving company Veritas just acquired, with antispam software from Veritas, Bloom noted. "In an Exchange environment, think of the key requirements around protecting e-mail, filtering spam and regulatory compliance... we will have all the pieces," he said. Thompson added that there is no shortage of ideas, that the challenge will be distilling them down and getting it done.

On that note, analysts agree that Symantec has done a better job of integrating its previous acquisitions than Veritas. Richard L. Ptak, analyst with Ptak, Noel & Associates, said Veritas stumbled when it failed to effectively capitalize and leverage its acquisitions of Jareva and Precise Software to expand its offering for application performance management and IT infrastructure management. "The acquisition by Symantec means deeper pockets, a broader set of experiences, and expanded opportunity to utilize and apply this technology," he said.

Management changes

The combined company will operate under the Symantec name. John Thompson will continue as chairman and CEO of the combined company, while Gary Bloom will be vice-chairman and president. The board of directors of the combined company will include six members of Symantec's current board and four from Veritas' current board for a total of 10 members.

Finally, Gary Bloom said that combining two software companies will be easier than merging a software and hardware company as the cultures are similar. Thompson noted that at least this deal is "friendly," which is more than can be said for Oracle's hostile takeover of PeopleSoft.

Related Topics: Storage vendors, VIEW ALL TOPICS

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