Symantec snaps up Veritas Software for $13.5 billion in stock
Thursday, December 16th 2004, 10:59 am
By: News On 6
SAN FRANCISCO (AP) _ Computer security giant Symantec Corp. is buying storage and backup program maker Veritas Software Corp. to create the world's fourth largest software company. The deal, announced Thursday, was initially valued at $13.5 billion, but the price of the all-stock acquisition quickly fell after investors weighed in on the merger.
The combination is designed to create a one-stop shop for protecting against computer viruses and ensuring the reams of vital information stored on corporate networks remains accessible.
``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 $1.97 to $25.41 during Thursday's trading on the Nasdaq Stock Market, where Veritas' shares dipped 2 cents to $28.09. The decline shaved nearly $1 billion from the deal's initial value.
The negative reaction reflects the stock market's puzzlement over why Symantec, a leader in the rapidly growing market for security software, is buying Veritas, whose sales have been rising at a much slower clip, said American Technology Research analyst Donovan Gow.
``They are complementary businesses, but if security is so great, then why would you buy something outside the sector?'' Gow said.
Thompson tried to allay the concerns Thursday. ``This is not a defensive move by any stretch of the imagination,'' he told analysts.
After the all-stock acquisition closes in next year's second quarter, Symantec expects to have annual revenue of $5 billion. Only Microsoft Corp., Oracle Corp. and Germany-based SAP generate more software sales.
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 their customers' desire to deal with fewer vendors.
Oracle Corp. got the ball rolling with a $10.3 billion takeover of bitter rival PeopleSoft Inc. _ an acquisition that was cinched at the week's outset after 18 months of turmoil.
Unlike the rancorous exchanges that preceded that transaction, Cupertino-based Symantec and Mountain View-based Veritas cordially negotiated their deal in the last two or three months.
In a joint interview Thursday, Thompson and Veritas CEO Gary Bloom said the talks began with a friendly glass of wine and quickly progressed from there as they shared their similar views about the industry's direction.
``When you share as much symmetry as we do, things can happen pretty quickly,'' said Bloom, who will become the merged company's vice chairman and president.
Thompson will remain CEO of Symantec, a company best known for its fighting computer viruses with its Norton-branded software.
Unlike most corporate mergers, relatively few layoffs are expected after the 6,000-employee Symantec and 7,000-employee Veritas join forces.
That's because Symantec and Veritas focus on different markets that require different job skills.
The ultimate value of the deal will hinge on how Symantec's stock performs in the months ahead. Symantec will exchange 1.1242 shares of its stock for each Veritas share to pay for the acquisition.
If the deal is completed, Symantec shareholders will own about 60 percent and Veritas shareholders would have 40 percent of the combined company.