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Symantec Expects to Close Veritas Sale by January End

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Symantec Corp.SYMC and The Carlyle Group CG have pushed back the closing date for the acquisition of the former's storage business, Veritas. However, the reason behind the delay has not been specified by either of the companies.

The companies now anticipate closing the sale on Jan 29, 2016, instead of Jan 1. In August, Carlyle Group, along with Singapore's sovereign wealth fund, GIC, signed a deal to buy Veritas for $8 billion from the cyber security company.

Selling Veritas reflects Symantec's strategy of shifting its focus to the security market while lowering the dependence on antivirus. Under this plan, earlier this year, the company hired 65 engineers and data scientists from Boeing Co.'s Narus security division who specialize in network-monitoring technologies used by the U.S. government.

Veritas offers a wide range of data backup and recovery, and storage management products to nearly 75% of the Fortune 500 companies. In 2005, Symantec acquired Veritas for roughly $13.5 billion in an all-stock deal.

However, the merger did not live up to Symantec's expectations as slowing PC sales hurt the security business, while sluggish demand for storage and data management products affected Veritas. The current valuation of the company's data storage unit marks a significant drop from its acquisition price.

Therefore, last year in October, Symantec announced its decision to split the data-storage and cyber security businesses into two publicly traded companies. In January, the company further stated that, following the split, it will operate as two entities - the security business and the information management business.

Later, in April, The Wall Street Journal reported that Symantec was looking for potential buyers for Veritas. This was further confirmed by a Reuters report stating that the company had contacted NetApp Inc. NTAP , EMC Corporation EMC and several private equity firms in this regard.

We believe that the divestment is likely to streamline Symantec's operations and maximize shareholders' value. Renewed focus on the core business can also revive its operational performance.

The company expects to receive net cash proceeds of approximately $6.3 billion from the deal. While a portion of the proceeds will be returned to shareholders, the rest will be reinvested in the business.

Symantec has a lot to worry about at the moment, given the persistent weakness in PC sales that is hurting its core Norton Anti-virus software business. Other than the intensifying competition, this business has been dealt a severe blow by the increased usage of smartphones and tablets.

Many investors are skeptical about whether the spin-off would work in favor of this beleaguered company. The past decade has seen a host of new specialized security companies like Kaspersky and Quick Heal, making their presence felt. These companies will not leave a stone unturned to strengthen their position as the behemoth struggles to re-invent itself.

We believe that the deal will provide Symantec the much-needed funds to continue to expand its product portfolio and presence in the fast-growing markets.

Conclusion

Symantec does not have a long time to revamp and reorganize itself. The spin-off should be a good thing for the company, as it will drive more focus in its core business, which should translate into new products and a more focused sales team. These two factors in combination should lead to increased revenues and net income.

Currently, Symantec has a Zacks Rank #5 (Strong Sell).

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SYMANTEC CORP (SYMC): Free Stock Analysis Report

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CARLYLE GROUP (CG): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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