So veritas has been bought for $13.5 billion of stock, a massive amount of money. Of course, it's not real cash money but it is money none the less. But why has Symantec bought Veritas? And why has Veritas let itself be bought? Is it a loss of nerve by one and arrogance by the other?
What compellingly better deal does it bring to customers? Why should the world's pre-eminent anti-virus and security products company have a good fit with a storage, data and system management company?
John W. Thompson, Symantec's chairman and CEO said,"Customers are looking to reduce the complexity and cost of managing their IT infrastructure and drive efficiency with fewer suppliers." That's the first quote in the press release by the way. Doesn't it strike you as, well, underwhelming and even trite? If that were sufficient reason to merge companies then IBM and Microsoft should get together. Is it just about creating a one-stop-shop for security and data management products?
No, I just can't see that as real, you know, a 'real' reason for the merger. There has to be more to it than this gloss.
Balancing security and availability
Thompson went on to say, ""The new Symantec will help customers balance the need to both secure their information and make it available, thus ensuring its integrity."I don't buy this message. What does anti-virus software have to do with backup and SAN volume management? The companies say they are in different markets. It's like trying to say that life insurance is synergistic with bank accounts or cars with gardening equipment. They are not.
Veritas' Chairman, CEO and president, Gary Bloom, said, "Our customers have told us that one of their most critical needs is to enable 24x7 access to information. At the same time, they must maintain tight security, comply with all regulatory requirements and operate within their existing budget constraints."
These are fine words but what do they mean? They could have been uttered by Steve Ballmer or Carly Fiorina. There is nothing specific here.
Three customer wins
The two companies state that customers will gain breadth, depth and global cover. Breadth means a broad range of leading security and storage solutions at every tier of the enterprise - end point, gateway, and application - across all platforms from a single vendor. Yes, okay, they had the breadth before; so this is a restatement of the single vendor argument. It's not sufficient reason to have a merger.
Depth is about leading-edge technology combined with expertise to architect, design, and manage security, storage, and IT infrastructures. Yes. They both have this already. Do they mean that they can now better architect, design, etc., combined security, storage and IT infrastructure technology? They have no products to demonstrate. There is no prototype technology thay are able to point to. This is just a hope.
Global Reach means world-wide sales, service, and channel partner organisations supporting millions of consumers, and small, medium, and large enterprise customers. Well, frankly, they had most of that before. Veritas hasn't exactly suffered revenue loss of any significance because it can't sell its products in Botswana whereas Symantec can. Where the revenue territories count then both companies are selling there already. No geographic weaknesses are mentioned here. So, when you are looking for the real merger reason, this is not it.
Where does that leave me in hunting for the reason for the merger? That perhaps the expressed reasons don't tell the real story.
The NetApp view
What do Veritas and Symantec partners think? Here is Tim Pitcher, VP of strategic development EMEA at Network Appliance: "The Symantec/VERITAS merger marries data availability and security to provide a very compelling solution for data-hungry and information-driven customers."
But why is it compelling?
He goes on to say, "Importantly, we believe this merger validates the NetApp philosophy that 'specialists win' and represents the market reality that pure-play companies focused on their own core competencies deliver superior customer value. Symantec and NetApp are two specialists in their fields - and we both seem poised to reap the benefits of that specialisation."
It seems to me that the very quality he praises both Symantec and Veritas for - being pure-play companies focused on their own core competencies - is lessened by the merger. Two specialists who combine become generalist. The new Symantec is not a pure-play company anymore; it is a dual-play company. Nothing compelling here, in my view, at all.
Why have they merged?
Is it not the case that Symantec has grown to be the 800lb security software products gorilla and significant revenue growth has to be looked for elsewhere? It's got too big for its security boots. Thompson has bought Symantec a revenue stream and a set of customers who can be cross-sold Veritas products. It's like a bank buying an insurance company if this view is right.
They can see the synergy in theory but the synergy is an optimistic hope without combined products or technology - and there is none of that. All they can be certain of is that their products don't compete. And lack of competition doesn't mean synergy will happen.
Will some of the 6,000 Symantec employees or 7,000 Veritas people get fired to save cost? Apparently not. Both Bloom and Thompson say this isn't what it's about. The two companies operate in different markets and so don't need to do that. Well, in that case, where is the synergy?
Does size matter?
The new Symantec will be the world's number four software company after Microsoft, Oracle and then SAP. According to IDC, Symantec has 40 percent of the security market and revenues from it have enabled it to have the financial clout for the merger. Is it really the case that Symantec needs size to compete with Microsoft? Mr Gates' Redmond monster is getting into the security market and, increasingly, into the storage market. Is this the motivating force for Symantec?
As for Veritas it has become increasingly isolated in the storage market, because it has no hardware. There are very few large software-only storage companies. EMC is now HW and SW. StorageTek is HW and SW. NetApp is HW and SW. Engenio, HDS, Seagate, Maxtor, Western Digital and others are HW. IBM is HW and SW. HP is HW and SW. The message is that to be a serious and large storage player you have to have a HW play. As that becomes commoditised then it's the SW that adds value.
Since EMC bought Legato the writing has been on the wall for Veritas. Growth in the storage market comes from integrating storage HW and SW. Veritas has no storage HW expertise. The tide of consolidation amongst storage suppliers is for HW suppliers to gobble up SW suppliers.
So one view is that Veritas saw this trend and got the best deal from the point of view of its SW status and expertise by fleeing into the arms of Symantec.
There is no tide of consolidation going on amongst security suppliers at this level. Symantec is on its own with its organic and acquisition-led growth. Its ambitions to be a bigger, a much bigger company, can no longer be met by growth in the security market alone - that's a very strongly implied message here. So it has joined with Veritas to better compete with Microsoft. On this basis the merger is defensive and the likelihood is that it will not deliver the hoped for goods.
- There is no demonstrable combined security and data management technology or product.
- Having to deal with separate storage and security vendors is surely not a mission-critical deal to customers.
- There are no cost-savings from firing employees in prospect
It looks like the professed reasons for the merger and benefits to customers don't stand up. Unless there is something we are not being told this looks like a Christmas present too far, for both companies.