Is Symantec breaking up?

Should Symantec split into more manageable components?

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Is Symantec breaking up? ((ITP Images))
By  Manda Banda Published  August 29, 2012

Symantec's decision to fire Enrique Salem, a move applauded by investors, signals a coming change in the company's strategy that could include a breakup of Symantec along its storage and security lines, according to industry analysts.

Symantec has said Salem stepped down from his position as president and CEO, which he has held for the past three years, and is being replaced by chairman Steve Bennett, who will add the titles of president and CEO to his list of duties.

The surprising news of Salem's leaving came as Symantec reported that for its Q1 ended June 29, it saw 1% year-over-year growth in revenue but a drop in profit of 9.9% to $172 million from $191 million one year earlier.

Symantec has been struggling with several issues in the past few years, including trying to find a strategy to turn its business model from one that relies on the sale of shrink-wrapped software and software licenses to a Software-as-a-Service (SaaS) model that provides recurring revenue to the company and its channel partners.

With cloud computing and mobility challenges increasing every day, the need to find the right model becomes even more imperative for Symantec.

Despite all the challenges that Symantec faces, it has remained the top security software vendor with 20.6% market share in 2011, which exceeded the combined market share of its three closest competitors, according to research firm Gartner.

However, industry pundits have long argued that Symantec never successfully leveraged its 2005 acquisition of storage vendor Veritas, for which it paid about $13 billion, and its share price never approached the high it achieved months before the acquisition was revealed.

Symantec is still the second-largest storage software vendor, but its market share has been slowly slipping over the past few years as EMC and a host of smaller vendors have been growing. Analyst firm IDC estimated Symantec's share of the 2011 storage software market at 15.8%, down from 16.3% in 2010.

As a result, many in the industry have been calling for Symantec to streamline its strategy and possibly even divide into more manageable security and storage components, calls that have been amplified in the wake of Salem's firing.

I do believe that Symantec's decision to replace Salem with Bennett is ‘a major step in the right direction' after a series of missteps including acquisitions and execution issues.

Industry commentators, bloggers and analysts all agree that Salem's departure signals a potential strategic change at the company, which could lead to Symantec's breakup. But what could happen if Symantec were to breakup its storage and security business? Would a breakup of the company give Symantec better leverage and make it easier for the company to take advantage of opportunities in the cloud and mobile markets?

There are no easy answers but what is emerging after Salem's removal is that partners and analysts had become disillusioned with him in part because of inconsistent execution.

For Symantec's channel partners, any change is being viewed as a positive move and in the case of Bennett, it is a change with hope.

Many partners expect the focus at Symantec under Bennett to be on transitioning its information management and security business to being successful in the cloud and mobility markets.

Symantec's next moves under Bennett will determine how it deals with the channel going forward. Over the past three years, Symantec solution provider partners have been looking for recurring revenue. Whether the new leadership will heed this call remains to be seen but partners know for them to succeed they need to secure future revenue streams.

2399 days ago
Gordon Malusa

Steve Bennett has a strong record of corporate leadership, with previous positions as CEO of Intuit and a 23-year career at General Electric before that. Bennett has been on Symantec’s board since 2010 and its chairman since 2011 and thus already has strong insight into the company and its strengths and is well positioned lead the company moving forward. Lastly, Dan Schulman, current member of Symantec’s board, was named lead independent director of the board.

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