Symantec to Buy Veritas for $13.5B

UPDATED: Symantec agreed to acquire Veritas Software for $13.5 billion in stock, a deal that would create one of the largest brands in the security and back-up software market.

Symantec is a leading security software provider. The Cupertino, Calif.,
concern has been looking for ways to grow and diversify its portfolio at a time
when rivals are adding new weapons to attack viruses and assaults from
malicious users.

The leader in back-up software to help companies get back on their feet in
the case of power outages or disasters that threaten corporate data, Veritas
has been evolving as a utility computing company.

This has led the Mountain View, Calif., company to acquire software
specialists that specialize in computing availability, such as server
provisioning, application virtualization and application performance
management.

Ideally, a combination of Symantec and Veritas will give businesses and
consumers a more effective way to secure and manage the information they
hold on computing machines, from desktops to servers in data centers.

Symantec CEO and Chairman John W. Thompson and Veritas President, Chairman
and CEO Gary Bloom discussed the motives for the deal on a conference call
Thursday. They said the markets for security and computing availability
software are converging.

“While the regulatory environment requires increased information security,
future business opportunities require more and more information to be made
available to a greater number of people,” Thompson said. “This dichotomy is
driving the obvious convergence between securing the infrastructure and
ensuring the information availability.”

“As our customers have begun to migrate to a utility computing model,
availability and security of information have emerged as their top
priorities,” Bloom said. “At the same time, our customers are looking to
consolidate suppliers and eliminate complexity. A single company that can
secure and make available all their information represents a unique value
proposition.”

Forrester Research said in a note to journalists it feels a merger between
Symantec and Veritas would be good for both
companies and their shareholders by opening many new revenue channels while
closing none.

The Cambridge, Mass., outfit said Symantec is re-inventing itself into a
major enterprise security management vendor with acquisitions and new
marketing drives, but acquiring Veritas allows it to fill some
gaps. Conversely, Veritas is a successful backup and archiving vendor
looking for a way to penetrate the security market.

These factors alone make the deal highly synergistic.

Thompson said the move positions Symantec as the fourth-largest software
company in the world, with projected revenue of
$5 billion for fiscal year 2006. He expects 75 percent of the revenue to
come in from enterprise customers, with the remaining 25 percent coming from
sales of security software to consumers.

Symantec will also have $5 billion in cash and 13,000 employees, making it
one of the largest software companies in
the industry. Citing IDC estimates, Thompson said the company will have a
$56 billion market opportunity by 2007.

While Thompson and Bloom have characterized the deal as a friendly merger,
Symantec is in the driver’s seat. The new business will operate under the
Symantec name, with Thompson continuing to serve in the same capacity. Bloom
will be vice chairman and
president of the company, responsible for sales, services and support
activities.

The board of directors of the combined company will include six members of
Symantec’s current board and four from Veritas.

The companies said in a statement the purchase price was based on Symantec’s
stock closing price of $27.38 per share for Dec. 15. Under the
agreement, Veritas stock will be converted into Symantec stock at an exchange
rate of 1.1 shares of Symantec stock for each share of Veritas stock.

The deal is expected to close in the second quarter of 2005. Should it
succeed, Symantec shareholders will own 60 percent and Veritas shareholders
approximately 40 percent of the combined entity.