Symantec may buy Veritas for over US$13 billion

Deal could be announced before the end of next week

Security software company Symantec is negotiating to buy storage software vendor Veritas Software for more than US$13 billion (NZ$18.3 billion), according to a report in The New York Times.

Negotiations are almost complete, and the companies could announce a deal this week, according to the report. However, some issues remain to be resolved after more than a month of talks, and the deal could still fall through, the report said, citing executives close to the negotiations.

A Symantec spokeswoman declined to comment on the published report, but said that if a deal was reached, it would be announced before the end of next week.

Veritas sells backup, archiving and file system software. The company has around 6,700 staff in 40 countries, according to the company's website. Veritas reported revenue of US$1.75 billion for the year to December 31, 2003. and US$497 million for the quarter to September 30.

Symantec sells software to protect computer systems and networks, including firewalls and tools to detect viruses and network intrusions. Symantec reported revenue of US$1.87 billion in its last fiscal year, the period to March 31, and for the quarter ended September 30 it reported revenue of US$618 million.

Acquiring Veritas would allow Symantec to extend protection of corporate information systems to the data they contain. Earlier this year, Symantec swallowed antispam software company Brightmail for $370 million and security consultant @Stake, and last week it announced plans to acquire intrusion system Platform Logic.

Symantec may be trying to bulk up its enterprise software business, as it watches Microsoft begin to play a more active role in the consumer security software business, says Mateo Millet, an analyst at Avian Research.

Sales of Symantec's products for home users grew 63% between the quarter ending September 2003 and the end of September 2004. Those sales now make up 51% of Symantec's revenue, compared with 45% a year ago. At the same time, sales of security products to companies grew by a more modest 27% over that period and now account for just 36% of the company's revenue, compared to 41% in September of last year, according to Symantec.

Symantec has a number of data backup and recovery products, including its LiveState line of server and desktop recovery software, that could mesh with Veritas' technology. Symantec planners have also been edging into the storage market, with acquisitions like the December 2003 purchase of PowerQuest, which made storage management software and services.

"Storage and security go well together. They're trying to diversify in the enterprise space and build that business," Millet says.

While admitting he was "shocked' by reports that Symantec could buy Veritas, Carl Greiner, senior vice president of technology research services at Meta Group, agrees the storage and security businesses are complementary.

Security is becoming more and more of a factor in sales of storage technology, as companies look for ways to manage and control access to stored data and how to comply with a host of data privacy regulations, Greiner says.

Companies need to classify data to know which information should be secured, what kind of data should be highly available and what steps are needed to comply with regulatory requirements, according to Greiner.

"Security is more than just backup and recovery. You have to manage the data effectively, and security is just one component of classification," he says.

That said, Veritas and Symantec have both grown quickly through acquisitions in recent years, and knitting together disparate technologies and corporate cultures from those acquisitions could be a major challenge for the merged company, Greiner says.

"It will mean that you have to wade through more integration, and you could have a potential negative when it comes to getting product out," he says.

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