Symantec Splits Up. Perhaps 2 Is Better Than 1.

Symantec Splits Up In A Series Of Silicon Valley Heart Breaks.

First,  EBay Inc (EBAY) decided on 30^th September to spin off its PayPal payments unit from its market place business. Then Hewlett-Packard Co. (HPQ) announced their split on 6^th October into two companies by end of fiscal year 2015.  Barely a week away, Symantec (SYMC) announced its plans on 10^th October to separate the company into two with an even more aggressive deadline of end December 2014.

Symantec’s split essentially reverses its $13.5 billion acquisition of storage company VERITAS Software in 2005, and follows the trend of splitting up to focus on faster growing business.

1. WHY SPLIT

The reason given was that the security and storage industries are changing at a fast pace. Both businesses need different strategies, investments and go to market. Symantec said the split will allow each company to:

• Focus on growth opportunities, research and development  investments, and go-to-market capabilities
• Reduce operational complexity
• Enhance strategic flexibility, pursue partnerships, and develop independent mergers and acquisition strategies
• Set distinct capital allocation policies

2. SECURITY
 
Michael A. Brown will continue as the President and CEO of Symantec focused on security. 

• This business will focus on Symantec and Norton end point security and cyber security services. 
• According to Gartner, Symantec is the market leader at $4.2 billion with 18.7% market share, almost double of the nearest competitor McAfee at 8.7%, followed by IBM at 5.7%.  The market is expected to reach $38 billion by 2018. 

In the security segment, Symantec helped pioneer anti-hacking technologies and its Norton product line, made it one of the best known security vendors.  However, it has increasingly found itself out of step with the security industry. Symantec faces escalating threats from professional hackers who rage battles beyond traditional security protection of viruses and cyberthreats.  The recent data breaches at Target Corp, eBay, Home Depot and JPMorgan show how hackers are finding new sophisticated ways against advanced detection systems.

On top of that, Symantec’s anti-virus software which is attached to PC sales took a beating with the PC slum, as its software was often bundled with the new computers.  Symantec had failed to catch onto the mobile market boom with mobile security. If Symantec wants to be successful in security, it must gear itself towards where more than half of the market spends and the fastest-growing security areas  of services, which includes consulting, outsourcing and implementation. 

3. INFORMATION MANAGEMENT

John Gannon will be General Manager of the new information management business. 

• This business will focus on backup and recovery, archiving, eDiscovery, storage management and information availability services. 
• Symantec claims to serve 75% of Fortune 500, estimated at 15% market share. This market is expected to grow to $16 billion by 2018.  Symantec’s appliance products have a 27% year on year growth and its back up products are among the leaders in the segment.

The information management market is likely to grow with new investments in virtualization, software defined data center technologies and cloud solutions.  Increasing data growth requires technology for data management from back up, recovery, access, storage anywhere and everywhere.

4. WHAT'S NEXT

The split up companies are up for grabs from EMC, HP, Cisco, Netapp and private investors.  It would be interesting to watch who will buy which company up, depending on the investors' focus on revenue from the cash cow or growth.