Symantec to split into security and storage software companies

October 9
7:58 PM 2014

Norton antivirus maker Symantec Corp (SYMC.O) will split into two publicly traded companies, one selling security software and the other providing data management, potentially making itself more attractive to suitors.

Symantec's revenue growth has lagged the rest of the security software market in recent quarters, with slowing PC sales hurting demand for the company's software, which often comes bundled with new computers.

The Mountainview, California-based company has also failed to establish a strong foothold in the mobile security market.

Symantec's split essentially reverses its $13.5 billion acquisition of storage company Veritas Software a decade ago and follows a trend of companies splitting themselves to focus on faster growing businesses.

"Symantec has been a headache name for tech investors over the last decade. It's nice to see the board make a decision that strategically makes sense for the company and its investors," FBR Capital Markets analyst Daniel Ives said.

Symantec's break-up comes during a banner year for spinoffs. More than 60 spinoffs are expected to be completed this year, more than in any year since 2000, according to Spin-Off Research, a subscription service for hedge funds and institutional investors.

Hewlett-Packard Co (HPQ.N) said on Monday it would separate its computer and printer businesses from its corporate hardware and services operations.

Online auction company eBay Inc (EBAY.O) said last week it would spin off its electronics payment service PayPal.

A number of potential buyers, including Cisco Systems Inc (CSCO.O) and NetApp Inc (NTAP.O), will likely show interest in each of the companies Symantec splits into, Piper Jaffray analyst Andrew Nowinski said in a note.

FBR's Ives said the "cash-cow" storage business could attract interest from private equity players.

"Post split, you have two companies, one focused more on cash flow and one focused more on revenue. So, put together, can it help revenue? I think it can, certainly, but you have to execute," investor Tim Ghriskey told Reuters.

Symantec's security business generated revenue of $4.2 billion in fiscal 2014, while the data management business, which provides data backup, recovery and management services, generated $2.5 billion.

Michael Brown will continue as chief executive of Symantec and Thomas Seifert as chief financial officer, the company said. Brown took over as interim CEO in March after his predecessor, Steve Bennett, was fired.

The spinoff is expected to be completed by the end of December 2015, Symantec said.

Shares in the new data management business will be distributed tax-free to existing Symantec shareholders. The stock distribution ratio will be determined later, the company added.

J.P. Morgan LLC acted as Symantec's financial adviser.

Symantec shares closed down 2.3 percent at $23.44 on the Nasdaq on Thursday.

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