December 16, 2004 4:40 PM PST
Rivals hope for the worst for Symantec
On Thursday, Symantec announced that it planned to merge with the storage software maker in a $13 billion deal. While Symantec has successfully integrated nearly a dozen acquisitions in the last three years, the latest merger plan has competitors hoping for the worst.
"This is the largest software acquisition in history," said Jim Geronaitis, vice president of Computer Associates International's storage management division. "And both of the companies are trying to integrate their previous acquisitions, so the new company is going to be hard-pressed to bring anything else into the organizations for some time to come."
The deal pits the resulting security and storage company against new foes and old allies. Storage company EMC, a fair-weather partner of Symantec but rival of Veritas, will compete directly with the new company in storage. IBM--a sometimes-ally, sometimes-enemy of Symantec--will be more of a direct rival because of its significant share of the storage market and recent moves in the security space.
Symantec's potential enemies predicted a tough merger for the new company.
"Right now, mergers of this type and of this scope--where the two companies are both large--tend to be disruptive," said Todd Cadley, a spokesman for EMC. "Because of the disruption, we will accelerate our gains in the market."
However, Symantec argues that the new company won't need as much integration as some acquisitions, since the two businesses' product lines are so different.
"Both companies face the same players in the marketplace, and both companies partner with the same players in the marketplace to a greater or lesser extent," said John Schwarz, Symantec's chief operating officer. "The only thing that changes is that these relationships become a little more complicated as our footprint continues to grow."
Moreover, the new company comes together in a friendly partnership, unlike the recent business software alliance agreed to by Oracle and PeopleSoft, which was steeped in animosity.
Consolidation is the name of the game
Yet alliances are sure to change again. The number of players in the information-technology infrastructure market, which has been undergoing consolidation for a number of years, will continue to decrease, analysts predict.
"Consolidation has already been going on for some time and will continue for a long time out," said Ray Paquet, of market research firm GartnerGroup. "Look at the automotive industry. It's been consolidating for the last 100 years and still is."
Consolidation has ruled the security industry for the past three years, with Symantec making almost a dozen acquisitions, and infrastructure companies such as Cisco Systems and Juniper Networks buying into the market. However, mixed results have come of mergers and acquisitions, industry analysts have noted.
CA, for example, is seeking to broaden its offerings in security management and may snap up other players outside its industry to fill that hole, Paquet said. Last October, CA acquired network identity and access software maker Netegrity and has partnered with storage maker Iomega.
Meanwhile, analysts noted that networking companies such as Cisco and Juniper are also on the path of bolstering their security offerings. Cisco has snapped up BCN Systems, Jahi Networks, and Perfigo in the past three months, while Juniper bought network security and services company NetScreen earlier this year.
However, analysts do not expect to see storage player EMC attempt to mimic Symantec's move with an equally large acquisition in the security market. Steve Hunt, vice president and research director for market intelligence firm Forrester Research, said EMC is more likely to be a target than an acquirer.
"They have not been successful in markets outside of their space," Hunt said.
While the merger will likely doom the nascent partnership between Symantec and EMC on scanning stored files for viruses, other Symantec partners are more excited. Network Appliance, a storage hardware maker that has partnerships with both Symantec and Veritas, lauded the deal in an e-mail statement.
"NetApp customers can benefit tremendously from this merger, as we continue to expand our joint solution development, tighten interoperability and simplify management for existing and future Symantec and Veritas products," Paul Albright, senior vice president of marketing for Network Appliance, said in a statement.
CNET News.com's Mike Ricciuti contributed to this report.