- The Washington Times - Thursday, December 16, 2004

SAN FRANCISCO (AP) — Computer security giant Symantec Corp. said yesterday it would buy storage and backup program maker Veritas Software Corp. to create the world’s fourth-largest software company.

The all-stock acquisition initially was valued at $13.5 billion, but the price quickly plummeted after investors weighed in on the merger.

The combination is designed to create a one-stop shop for protecting against computer viruses and ensuring that the reams of vital information stored on corporate networks remains accessible.

“This is a profound event for the entire industry,” Symantec CEO John Thompson told analysts during a Thursday conference call. “I think together we will become a very powerful company.”

Investors aren’t convinced. Shares of Symantec, known for its Norton anti-virus products, fell $2.25, or 8.2 percent, to $25.13 in Nasdaq Stock Market composite trading. Mountain View, Calif.-based Veritas fell 12 cents to $27.99.

American Technology Research analyst Donovan Gow said the market’s negative reaction reflects the stock market’s puzzlement over why Symantec, a leader in the rapidly growing market for security software, is buying Veritas, whose sales have been rising at a much slower clip.

“They are complementary businesses, but if security is so great, then why would you buy something outside the sector?” Mr. Gow said.

Mr. Thompson tried to allay the concerns yesterday. “This is not a defensive move by any stretch of the imagination. It’s an offensive move,” he said.

After the deal closes in next year’s second quarter, Symantec expects to have annual revenue of $5 billion.

Only Microsoft Corp., Oracle Corp. and Germany-based SAP generate more software sales.

The deal marks the second blockbuster merger of major software makers this week — a phenomenon widely expected to continue as companies try to adapt to a maturing industry and cater to their customers’ desire to deal with fewer vendors.

Oracle got the ball rolling with a $10.3 billion takeover of bitter rival PeopleSoft Inc. — an acquisition that was wrapped up at the beginning of the week after 18 months of turmoil.

In a joint interview yesterday, Mr. Thompson and Veritas CEO Gary Bloom said the talks began with a friendly glass of wine and quickly progressed from there as they shared their similar views about the industry’s direction.

“When you share as much symmetry as we do, things can happen pretty quickly,” said Mr. Bloom, who will become the combined company’s vice chairman and president.

Mr. Thompson will remain CEO of Symantec, a company best known for fighting computer viruses with its Norton-branded software.

Unlike most corporate mergers, relatively few layoffs are expected after the 6,000-employee Symantec and 7,000-employee Veritas join forces.

That’s because Symantec and Veritas focus on different markets that require different job skills.

The divergence of the two companies makes it unlikely that their proposed marriage will encounter the antitrust obstacles that complicated Oracle’s bid for PeopleSoft.

The ultimate value of the deal will hinge on how Symantec’s stock performs in the months ahead.

Symantec will exchange 1.1242 shares of its stock for each Veritas share to pay for the acquisition.

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