Enterprise majors focus on the split

HP and Symantec have both announced plans to split their businesses in two, in order to be better focused and more agile

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Enterprise majors focus on the split Splitting Symantec will give flexibility and focus to both new companies, says Brown.
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By  Mark Sutton Published  November 23, 2014

The start of October saw two industry majors, HP and Symantec, announce plans to split their respective businesses in two.

The key word for both announcements was ‘focus’, with executives stating that by breaking their organisations down into smaller pieces, they would be able to focus better on core activities, and hopefully put the business back on the path to growth. Both companies have struggled in recent years, and while reaction to the announcements was mixed, most market watchers echoed the sentiment — a split was long overdue.

Shifting security market
Symantec announced its decision to split in two, after a comprehensive business review, stating: “Creating two standalone businesses will allow each entity to maximise its respective growth opportunities and drive greater shareholder value.”

The company will create two new operations, one focused on security and one focused on information management, with the split aimed to complete by December of next year.

Michael A Brown, Symantec president and CEO commented: “As the security and storage industries continue to change at an accelerating pace, Symantec’s security and IM businesses each face unique market opportunities and challenges. It has become clear that winning in both security and information management requires distinct strategies, focused investments and go-to market innovation. Separating Symantec into two, independent publicly traded companies will provide each business the flexibility and focus to drive growth and enhance shareholder value.”

While Symantec’s problems have not been as high profile as HP, the company has still seen a high turnover of CEOs in recent years, and has also faced stiff competition from many new contenders in a security market that has changed notably from the days when AV was all that was needed for IT security. Spinning off the information management business, which will include information management solutions such as backup, archiving, and eDiscovery, effectively restores data storage company Veritas, which was acquired by Symantec in 2005 for $10.2 billion. The slump in the PC market has hit Symantec’s core anti-virus business, but the company has also failed to capitalise on the Veritas acquisition and other buys, and has not been successful in integrating the storage and security businesses into a single go-to-market.

The company has also been through three CEOs since 2009. In March, Symantec fired CEO Steve Bennett, a move which Bloomberg cited company insiders attributing to Bennett’s not moving quickly enough to innovate on new products and growth initiatives.

Stephanie Balaouras, vice president and research director, Forrester, wrote in a blog post that the split would could be a move of last resort for the company.

Balaouras commented: “I have doubts whether simply splitting in two can spark innovation after nine years of gobbling up gargantuan (I still miss you, Veritas) and small vendors alike with little to show for it but operational indigestion. But I suppose anything is better than changing CEOs as frequently as I change the oil in my car and standing by and watching CISOs turn to completely new security brands as their trusted advisor. And there is this little matter of how mobile, social, cloud, and big data are completely transforming not only the way digital businesses compete and serve their customers but how technology vendors themselves deliver their own solutions and engage with their clients — and Symantec isn’t leading the charge in any of those market shifts.

“I believe that it really can’t get any worse for Symantec on an execution side. They have acquired a lot of really strong products over the years but completely failed to integrate, market, and sell them. This isn’t a function of buying bad companies/technologies, but instead a direct function of the inability to execute on a broad vision,” she added.

“This split can’t possibly make it worse and should eventually make it better if Symantec can fix their execution woes in a smaller, more focused environment. But if they fail to innovate as a smaller company, they will have no chance competing against vendors with much broader portfolios like EMC, IBM, HP, Cisco, Intel Security etc. who can sell not just to the CISO but at the CIO level as well.”

A split Symantec could quickly become an acquisition target. Piper Jaffray research analyst, Andrew J Nowinski, told IT News that Cisco could be a buyer for the security business, to triple the size of its threat intelligence network, while NetApp might be a buyer of the storage business to improve its competitive stance with EMC.

Fayaz Khaki, associate director, European Information Security, IDC, was more equivocal about Symantec’s prospects, but stressed that the company would still have to adapt to the speed of change in the security sector.

“Symantec have been toying with a split for a while — it has finally happened. It does make sense to split the two businesses especially if integrating them proved to be either problematic or difficult to align strategies. The security market has and continues to evolve away from the areas in which Symantec have traditionally generated the most revenue. As a result, their security business has come under threat recently by other niche vendors and also by smaller vendors who have been able to respond to market changes quicker,” Khaki said.

“The split allows Symantec to react to market changes quicker and also to ensure they can focus on a purely security related market strategy. Theoretically this should allow Symantec to bring products to the market faster. Symantec — indeed all traditional security vendors — are at crucial junctures in their history. The growth in the industry will come from cloud and mobile technologies, the Internet of Things (IoT) is also a huge potential growth market. Growth in the traditional markets in which security vendors play, i.e. desktop, laptop security, is fairly flat. Security vendors need to adapt to ensure they don’t miss market opportunities — speed to market with the right products is key to ensuring relevance and long term growth.”

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