Symantec to buy Veritas for $13.5 b

Wei Gu and Spencer Swartz

NEW YORK: Security software maker, Symantec Corp., has informed that it will buy data management software company Veritas Software Corp. for $13.5 billion, expanding into the data storage and recovery business.

Symantec is expanding its product line, betting it will help companies cuts costs by using one supplier by blending security with data management, John Thompson, Chairman and Chief Executive of Symantec said.

For Symantec, which is known for its Norton anti-virus software, the purchase will also expand its reach into the corporate software market and give it sales staff trained to sell to larger companies. The combined company will have annual revenue of $5 billion.

The all-stock deal values Veritas at $30.78 a share, a premium of 9.5 percent over its closing price on Wednesday on the Nasdaq stock market. Shares of Symantec, known for its Norton anti-virus software, fell as much as 9 percent to $24.76 on concerns that its growth rate will slow with the acquisition of Veritas.

"While we believe, longer term, that the acquisition of Veritas could make for an exciting company, we are concerned about the negative impact it will have on Symantec's growth profile," said Friedman, Billings, Ramsey & Co. analyst Nitsan Hargil, who downgraded Symantec to "market perform" from "outperform."

Shares of Veritas fell as much as 2.2 percent, after gaining more than 13 percent in recent days on reports of an expected merger.

Symantec competes with McAfee Inc. in anti-virus software. The industry has experienced three years of rapid growth, but analysts warn growth may slow.

Veritas competes with EMC and IBM in storage and data backup. The industry's growth rate is much slower than that of security software.

The deal comes three days after business software maker Oracle Corp. agreed to buy PeopleSoft Inc. for $10.3 billion. The combined revenue of those two companies is roughly $13 billion.

Analysts have said the software market is ripe for consolidation as companies contend with narrowing profit margins and slower growth in corporate technology budgets.

MIXED RECORD WITH ACQUISITIONS

Richard Williams, an analyst with Garban Institutional Equities, said that with the acquisition of Veritas, Symantec will be able to satisfy more customer needs for data security, protection and management, giving it an edge over rivals that can provide only partial solutions.

"Symantec is taking security and stretching it, making it something new. It will force all competitors to scramble to deal with it," said Williams.

Merrill Lynch analyst Edward Maguire said Symantec had a mixed record with previous acquisitions, but said its purchase of Veritas made longer term strategic sense, despite the short-term growth concerns weighing on the stock.

The combined company, which will retain the Symantec name, is expected to have revenue growth for the fiscal year ending March 2006 of 18 percent, Symantec said, noting it would it would be the fastest growing software maker with annual sales above $3 billion.

Under the deal, approved by the boards of directors of both companies, Veritas shareholders will receive 1.1242 Symantec shares for each Veritas share.

Symantec's Thompson will be Chairman and CEO of the new company. Gary Bloom, Chairman, CEO and President of Veritas and a former top executive at Oracle, will be Vice Chairman and President.

The deal is expected to result in cost savings of about $100 million, Thompson said in an interview.

He said no job cuts were expected from the merger. "This is not about cost savings or cost synergies ... We view this more as leveraging opportunities of both teams," he said.

The companies said the deal -- excluding items like restructuring charges -- will add to earnings per share in the first year, compared with Thomson Financial First Call's mean estimate of 98 cents a share for Symantec in fiscal 2006.