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John Thompson is no stranger to controversial acquisitions. Symantec, the security software company he heads, ventured out of the consumer business into the corporate market in 2000 with the purchase of Axent Technologies a deal that wiped 50 per cent off Symantec's stock price as shareholders worried it had overpaid.

The proposed purchase of Veritas, which will be voted on by shareholders of both companies on Friday, has stirred similar fears. The biggest deal in software history, with a value of $10.7bn, will link Symantec's fast-growing security business to the less dynamic storage software market where Veritas operates.

The prospect of slower growth and the difficulty of combining two big companies with very different products has left Wall Street in a sour mood. Observers reason that if Symantec is forced to consider deals such as this, then maybe the outlook in its core security market is not so bright after all.

“They're paying a full price for a company that could drag them down,” said Shirley Westcott of Proxy Governance, which advises institutional investors on how to vote on corporate events. Like Glass Lewis, another advisory firm, Proxy Governance has come out against the Veritas acquisition. However, Institutional Shareholder Services, the biggest and best-established firm in the field, has supported the deal, which is expected to get the support of both companies' shareholders tomorrow.

To Mr Thompson, the doubts have been no different to the ones that prevailed during his Axent deal. “We'll prove one more time that our long-term vision of where the industry is going, and what we need to do to respond to it is right,” he said in an interview this year. “We've done it before, we'll do it again.”

This time around, though, two things are different.

One is the nature of the merger: while the Axent purchase took Symantec into a new part of the security market, the Veritas deal is based on a theory of technological integration that has yet to be proved.

“We believe there is a logical tie between making information secure and ensuring its availability,” said Mr Thompson. According to this view, the separate markets of security, storage and systems management are set to converge, as companies seek to make their data centres more efficient.

Adding another 2,000 people to Symantec's 1,500 salesforce will bring “deeper coverage and the opportunity to cross-sell”, said Mr Thompson. By paying a 40 per cent premium to Veritas's shareholders, he has placed a big bet on his ability to fulfil that promise.

The other difference for Symantec comes in the shape of Microsoft. The software giant has been preparing to break into the anti-virus business for two years, and has promised a product this year. With its ability to bundle the software with its desktop products, this is a threat that has scared investors and hit the stocks of all the independent security companies.

Mr Thomson's anti-Microsoft strategy relies on Symantec's ability to move faster and create better products in a business it knows well as well as what he claims is a shift in the balance of power in the tech industry away from the software giant.

In the wake of the US anti-trust settlement, “they can't dictate to anyone like they used to”, he said. Computer makers, according to this view, will feel freer to install other companies' software on machines before they are shipped.

In recent weeks, the stock market's Microsoft fears seem to have eased a little. After falling by 45 per cent in the months after the Veritas deal was announced last December, Symantec's shares began a 23 per cent rebound in early May.

That may be less than the recovery seen at McAfee, another security software company, but it relieves the pressure on Mr Thompson as he faces Symantec's shareholders on Thursday.

Copyright The Financial Times Limited 2017. All rights reserved.
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