Symantec split necessary for focus, changing market dynamics

Security vendor will not be nimble enough to address the current landscape if it stays as one entity, says exec, adding that separate sales and product teams already have been established.
Written by Eileen Yu, Senior Contributing Editor

The decision for Symantec to split into two organizations was necessary, because it needed to be more effective and nimble in addressing customers' security needs amid an increasingly complex market landscape.

The security vendor initiated a strategy review 18 months ago where it evaluated its data backup and security businesses. "As we went through that process, we identified that the company as a whole would be better off splitting into two parts," said Michael Lin, Symantec's vice president of solution product management. "We felt that we would be more effective and nimble with one entity 100 percent focused on security, and another standalone focused on backup."

That meant having separate, dedicated teams for each of the two businesses, including in sales, product development, and management, Lin told ZDNet in a phone interview. The lack of focus was apparent when the company's sales team had to pitch both its backup and security products to potential customers. This drove some "delusion" in the market and among its customers, he said.

Noting that both were fundamentally different businesses with different models, he added that things moved quickly and were more advanced in the security realm. "As a combined entity with a portfolio as large as Symantec's, it's hard to be focused on each area...and to manage as one combined entity. We feel we can bring greater emphasis and focus as two separate entities," he said.

Symantec had announced plans to split the company into two public companies, with one retaining focus on security while the other will be focused on information management. The latter will be spun off as Veritas, which Symatec had acquired in 2004.

According to Lin, separation work had begun internally and dedicated sales and product development teams for Symantec and Veritas had been operating since the company's fiscal year this April.

What's left in the separation process is the backend infrastructure, including the HR systems and backup processes. Symantec, combined, has some 20,000 employees globally.

Customer contracts currently jointly serviced by the two businesses also will be split, though, such service agreements involved mainly large companies and are in the minority. Most customer contracts today already have separate contracts with Symantec and Veritas, said Lin, who had joined the company from the 2010 acquisition of Verisign's security business and will remain with Symantec after the split.

Since the vendor has large customers in most regions, including Asia-Pacific, efforts required to rework these service contracts will impact its client base worldwide, he noted. However, he added that the impact will be minimum and customer reaction had been positive.

"One of the biggest drivers for the split, even in large customers with joint contracts, we saw very little combined efforts and synergies between backup and security," he said. "From a customer perspective, they're actually excited about the split because they see us being able to be more focused. They see a more cohesive strategy and they're excited about the new products and offerings."

As of October, he noted that the company will be effectively "operationally separate", with plans to take Veritas public at the end of 2015.

Symantec was going through change, not struggling

Lin also rebuffed suggestions that Symantec was beleaguered as a company.

It ousted Steve Burnett as CEO last year, who himself had replaced former CEO Enrique Salem in 2012, and laid off hundreds of employees in the past couple of years.

Lin acknowledged that Symantec had undergone "a lot of changes" including two CEO changes. "I wouldn't say we were struggling. We were going through change and was inward-focused, as we looked at restructuring and reorganizing the company. So it's great now to go out to the market and start focusing outward."

And despite missing Street estimates in its latest fourth-quarter results, the Symantec executive said the company was "actually very pleased" having hit its business plan "from a sales perspective".

The vendor posted a net income of US$176 million, or 25 cents per share. Non-GAAP earnings were 43 cents per share on a revenue of roughly US$1.52 billion. Wall Street analysts had estimated earnings of 44 cents per share on US$1.56 billion revenue.

News of the Veritas acquisition in 2004 also met with a cold response, with industry analysts noting that the information management company would have been stronger as a standalone enterprise business. Were they proven right now with the Symantec split?

To which, Lin said: "I think the market has evolved significantly over the last 10 years. I haven't been at Symantec long enough to talk about the details or rationale behind that acquisition, but I can tell you that we feel like Veritas, at that time, was the right thing for Symantec.

"Now that the market has changed and customer behaviors have changed, we feel the split is necessary," he said. "When I think about the market dynamics, there are certainly two sides of it. The backup side of the business is very focused on helping customers keep their data backed up and helping them store their data. This, versus the security side, is quite different."

"We've seen such a rapid shift in the security market where attacks are becoming more advanced, and the impact of the attack is becoming more profound. The two [businesses] really are fundamentally different."

Moving forward, Symantec will be looking more closely at data analytics to improve its security offerings--something which it had not done sufficiently in the past, Lin noted. The company manages more than 175 million end-point devices globally and 30 percent of the world's e-mail traffic, he said, adding that it helps secure the largest private-sector security database globally.

The security also has a large Norton footprint, giving it considerable presence in the consumer market, he noted. "We have more than 3.7 trillion rows of data and we're seeing 200,000 new threats per second," Lin said. "It's an immense database we see and this gives us a tremendous opportunity to help us keep our customers safe."

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