Just after the United States stock market closed on Thursday, The board of directors of antivirus software pioneer Symantec Corp. (NASDAQ: SYMC) announced it has unanimously approved a plan to split the company into two standalone businesses.
According to a statement issued by the Mountain View, Calif.-based cyber-security and storage provider, one company will concentrate on cyber security and the other will focus on information management (IM).
“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,” said Michael Brown, Symantec president and chief executive officer, in statement. “Separating Symantec into two, independent publicly traded companies will provide each business the flexibility and focus to drive growth and enhance shareholder value.”
Symantec is expected to release it next earnings report on November 5. After the announcement the company’s stock rose as much as three per cent in low trading volume after closing the regular session 2.4 per cent lower at US$23.44.
Earlier this week, computer company Hewlett-Packard Co. also announced that it was splitting into two companies. HP’s announcement was made just a couple of weeks after online auction pioneer eBay Inc. announced it was cleaving its online payment unit PayPal.
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Symantec’s announcement late yesterday afternoon was not such a surprise since news reports that the company was contemplating a breakup began circulating on Wednesday. Company spokespeople, however, dismissed the reports saying Symantec does not comment on rumours.
Brown will be the president and CEO of Symantec and Thomas Seifert will continue to serve as chief financial officer. John Gannon will be general manager of the new information management business and Don Rath will be its acting CFO.
Gannon served as president and chief operating officer of Quantum. Prior to Quantum, he led HP’s commercial PC business. Rath joined Symantec in August 2012 and previously held senior tax and finance roles with Synopsys, Chiron and Veritas.
Symantec said the split will allow each company to:
- Focus on growth opportunities, research and development investments, and go-to-market capabilities
- Reduce operational complexity
- Enhance strategic flexibility, pursue partnerships, and develop independent mergers and acquisition strategies
- Set distinct capital allocation policies
Symantec said its security business is twice as large as its nearest competitor and operates in a market that is projected to grow to $38 billion by 2018. The unit generated revenue of $4.2 billion for the 2014 fiscal year.
The security business will include: consumer and enterprise endpoint security, endpoint management; encryption; mobile; secure socket layer (SSL) certificates; user authentication; mail; Web and data centre security; data loss prevention; hosted security; and managed security services.
Symantec’s IM business competes in a market that is growing to become $16 billion by 2018. The unit serves 75 per cent of the Fortune 500 companies. The IM business generated revenue of $2.5 billion in the 2014 fiscal year. Symantec’s appliance products have a 27 per cent year-over-year growth and its backup products are among the leaders in its segment.
The IM business will include: backup and recovery; archiving; e-Discovery; storage management; and information availability solutions.
The transaction will take the form of a tax-free distribution to Symantec shareholders of 100 per cent of the IM business in a new, independent, publicly traded stock.
The proposed separation is still subject to conditions, including final approval by the company’s board of directors, the effectiveness of a Form 10 (general for registration of securities) filing with the Securities and Exchange Commission, and satisfying foreign regulatory requirements.
The company expects to complete the spinoff by the end of December 2015.