Symantec may be the next major tech vendor to split in two, in the wake of similar moves by Hewlett-Packard and eBay.
Citing unnamed people with knowledge of the matter, Bloomberg News reported Oct. 8 that Symantec officials are considering breaking the company in two, with one company focused on security and the other on data storage. One of the people said an announcement could be made in a few weeks.
Symantec officials have declined to comment on the report.
The report about Symantec comes two days after venerable Silicon Valley company Hewlett-Packard announced it will split in two over the next 12 months, with one—which will be named HP Inc.—selling printers and PCs, and the other—Hewlett-Packard Enterprise—concentrating on corporate IT solutions and services. Officials with eBay announced Sept. 30 that the online auction site will split off its PayPal online payment processing businesses next year, creating two companies.
The recent announcements highlight a trend within the tech industry of some vendors splitting or shedding business units in an effort to become more focused and streamlined and to give a boost to their bottom lines. HP CEO Meg Whitman, in announcing the decision to split up the company after several years of pushing back at pressure to do so, said the result will be two more nimble companies that will have greater freedom to pursue their respective roadmaps and focus more narrowly on their customers.
Other major tech companies are finding themselves under scrutiny. Soon after HP’s announcement broke, speculation turned to Cisco Systems, a massive company that is aggressively building out its product portfolio in an effort to transform itself from a networking box maker into a major enterprise IT solutions provider. Storage giant EMC has been under pressure from an activist investor to divest itself of most or all of its 80 percent stake in VMware. Investor Elliott Management has argued that having VMware in the fold is a drag on EMC’s finances, though EMC officials have argued that the company’s federated corporate model that governs its relationship with subsidiaries VMware, RSA and Pivotal has been a benefit.
To be sure, not all companies are taking the smaller-is-better route. Dell is looking to become a larger IT solutions vendor, leveraging in-house development and acquisitions to broaden its product lineup in such areas as networking, storage, software and the cloud. Oracle has continued to grow via acquisitions, and Lenovo—which used its 2005 purchase of IBM’s PC business to become the world’s top PC vendor—is hoping to see the same success in servers after buying IBM’s x86 systems business and in mobile devices with the upcoming acquisition of Motorola Mobility from Google.
Symantec the Latest to Consider Breaking Up
Helping feed the trend toward big companies breaking up is Wall Street, according to Charles King, principal analyst with Pund-IT.
“The market has become so earnings-obsessed,” King told eWEEK. “Companies that can’t produce over-the-top earnings on a quarter-after-quarter-after-quarter basis get punished.”
IBM saw this earlier than most and began selling off its low-margin businesses, including PCs and commodity x86 servers, he said. Other vendors—including Dell and Lenovo—appear to be doing well even as they build out their businesses.
Dell, being private, is not as influenced by the desires of the market. Private companies that show annual gains of 5 to 6 percent do fine, King said. Public companies have to shoulder the expectations of the market and shareholders, making the road forward a bit more difficult.
In Symantec’s case, the company had made its name in security software, then in 2005 bought Veritas, a storage and backup vendor, for $10.2 billion. Symantec, like many tech firms, has been hurt in recent years by the contraction in the global PC market, and has seen revenues slow over the past several quarters. However, in the most recent quarter, the company’s revenues increased 2 percent over the same period last year, to more than $1.73 billion, while income jumped 50 percent, to $236 million.
Symantec on Sept. 25 named Michael Brown—who had been serving as interim president and CEO since March—as the permanent CEO. In the release announcing the appointment, Symantec officials said Brown would talk with employees, customers and shareholders about his strategic plan for the company within 30 days. In a statement at the time, Brown said that Symantec officials are “focusing our investments in businesses where demand is greatest and improving operational efficiencies to grow revenue and operating margin.”
Bloomberg News reported that one source said Symantec officials in the past had considered breaking up the company, and that Brown supports the idea. Two previous CEOs—Enrique Salem and Steve Bennett—said they wouldn’t break it up, according to the report.