Anti-Malware , Cloud Computing , Network & Perimeter
Head of Blue Coat to Become Third New Symantec CEO in Four Years
For its next move since jettisoning storage firm Veritas and becoming a pure-play security vendor, Symantec will now buy network and cloud security firm Blue Coat from private-equity owners Bain Capital, obtaining a replacement CEO in the process.
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Symantec announced June 12 that the boards of directors of both companies have approved the deal, which will be worth approximately $4.65 billion and is expected to close by October. As part of the deal, Blue Coat chief Greg Clark will become CEO of Symantec, thus making him the company's third CEO in just four years.
"With this transaction, we will have the scale, portfolio and resources necessary to usher in a new era of innovation designed to help protect large customers and individual consumers against insider threats and sophisticated cybercriminals," Dan Schulman, chairman of Symantec, says in a statement.
Symantec's previous era arguably ended in April, when outgoing CEO Michael Brown was booted after the company missed its Q4 fiscal 2016 sales targets. Symantec had forecasted that sales would reach $885 million to $915 million; they instead came in at $873 million. The company met its consumer sales targets; the shortfall came in enterprise sales. As Symantec said in its Q4 2016 quarterly filing: "A shift in enterprise security customer buying preferences is resulting in less license revenue during the quarter and more revenue being deferred to future periods. This included a faster than expected shift within our product mix to subscription and ratable contract structures."
In other words, the company appears to be having difficulty maintaining enterprise-related revenue as more organizations shift to cloud-based security products and subscription models that involve payments in installments.
Yet Another 'CEO Transition Plan'
Symantec attempted to spin these challenges - and Brown's departure - in a "CEO transition plan" statement, with Schulman claiming that "this is the right time to transition leadership for Symantec's next chapter of growth."
But growth has been a tricky topic for Symantec, although it remains one of the world's biggest information security firms, with $6.51 billion in 2015 revenue.
Two venture capitalists are bullish on Symantec's prospects after acquiring Blue Coat. In connection with the Blue Coat acquisition, technology investment firm Silver Lake will invest $500 million in Symantec, taking its total investment to $1 billion. Bain Capital, which bought Blue Coat in May 2015 for $2.4 billion, will invest $750 million.
Symantec says it will pay for the deal in part with cash currently in its coffers, as well as via $2.8 billion in new debt. "The company is focused on paying down a significant portion of this debt within the next several years with cash on the balance sheet and through cash generation," it says in a statement.
Despite aggressively shuffling its leadership in recent years, Symantec's board has yet to find someone who can revitalize the company. Symantec's board fired Enrique Salem - who oversaw the completion of the Veritas deal - in 2012 for missing earnings forecasts, fired his replacement, Steve Bennett, in March 2014, before announcing Brown as interim CEO, who was fired in April. Brown had served on the Veritas board since 2003 and joined Symantec's board in 2005 with its acquisition.
Blue Coat CEO Clark, who will soon take over leadership of Symantec, built and sold three technology startups before joining Blue Coat, which says it has 15,000 customers and had $598 million in revenue for the fiscal year ending April 30.
But Andreas Lindh, who serves as a researcher at Swedish security consultancy Recurity Labs, is not convinced that Blue Coat will help Symantec improve its financial performance.
Hold on a minute while I put on some Phil Collins to recapture some street cred.
The Veritas Legacy
Arguably, Symantec's flagging fortunes remain a legacy of its 2005 purchase of storage firm Veritas for $13.5 billion. Symantec was never able to convincingly blend the storage business with its security operations. The purchase continued to dog Symantec's operations until well past August 2015, when it announced that Veritas would be sold to The Carlyle Group, an asset management firm, for $8 billion in cash. At the time, now-former Symantec CEO Brown promised that the now "focused security company" would acquire new technology and unveil new products designed to jumpstart enterprise interest in its products and services.
But in January 2016, Symantec reported that "after uncertainties developed regarding the transaction," the purchase price had been revised downward to $6.6 billion in cash, although Carlyle also doubled the amount of offshore cash in Veritas - from $200 million to $400 million - and took a $400 million equity interest in Veritas, thus making the deal worth $7 billion.