Symantec To Face Further Struggles, Could Be Acquisition Target

Symantec's security portfolio is anchored with a quickly aging endpoint protection suite and a product portfolio that may have too many gaps and little growth potential to enable executives to acquire startups that are demanding a premium, according to analysts with an eye on the financial market and security startups.

The Mountain View Calif.-based vendor's security business still holds the market-leading endpoint protection platform, say partners who are selling and deploying its data protection products. The acquisition of PGP and Guardian Edge gave Symantec a grip on data encryption and the Vontu acquisition that placed Symantec firmly in data loss prevention. Partners who attended a Symantec's Engage event in Phoenix this week told CRN they walked away with a message that's been repeated by Symantec executives over the past two years: Believe in the long-term strategy and the ability to weave together an integrated security portfolio using threat intelligence.

It’s a message that will hopefully reward partners that specialize in security and have stuck by the company during the transition, said Philip de Souza, founder and president of Aurora Enterprises, a California-based security consulting firm and Symantec partner. Aurora is getting more attention than ever and could be in a position be a platinum partner when the Symantec breakup is completed at the end of 2015, said de Souza, whose firm partnered with PGP and stuck with Symantec following its acquisition of the firm in 2010.

[Related: Symantec COO: Partners Will Benefit From Breakup]

"We are deep and narrow and have a sales team who are fully certified to start the conversation throughout and the seasoned engineers who are able to take that deal and deploy the technology from start to finish," deSouza said. "Symantec led with encryption at one point in time and today we still see a lot of movement and interest in DLP and data classification."

deSouza and other partners say they are looking at emerging endpoint security technologies.

A crowded market for mobile security has put a damper on mobile security sales despite Symantec's acquisitions of Odyssey Software and Nukona. The mobile protection capabilities are largely separated from the endpoint protection platform, said one partner who isn't convinced that the company can pull together complete packages. Analysts expect growth to continue from Symantec's authentication or digital certificate business, which Symantec paid $1 billion for from VeriSign.

Partners told CRN that the company may need to make targeted acquisitions of companies to build advanced threat detection capabilities, despite readying the launch of an advanced threat protection product. Emerging cloud-based security vendors could be acquired and newer endpoint threat detection technologies may fit nicely into an updated Symantec security portfolio, they said.

NEXT: Symantec A Likely Acquisition Target

Symantec is more likely to be taken private once the separation is completed or it could become an acquisition target by a private equity firm, said Brenon Daly, a research director at research firm 451 Group. Information security startups are selling at a premium, Daly said, and slow growth doesn't give Symantec enough revenue to borrow against to become a significant buyer. Certainly large, strategic acquisitions like its $13.5 billion deal for storage giant Veritas Software is off the table, he said.

"In the long term, Symantec will be in a challenging position," Daly said. "Once you get burned by something like Veritas, you don't put your hand back in the fire."

A recent snapshot of some Symantec customers also paints a bleak picture, according to 451 Group.

The research firm's survey found Symantec customers forecasted a dismal spending outlook. About 13% of customers projected an increase in spending in 2015 and 16% forecasted lower overall spending. Nearly a quarter of Symantec customers said they were considering alternative products because the company isn't delivering on its strategic vision.

Other security vendors have been taken private. Companies like Chicago private equity firm Thoma Bravo have built up security portfolios in recent years. Thoma Bravo owns Crossbeam Systems, Blue Coat Systems, Entrust, Tripwire and Landesk Software and has an investment in identity and access management platform maker, Sailpoint Technologies. Vista Equity Partners acquired anti-malware and data loss prevention platform maker Websense for $906 million in 2013.

Symantec partners are enthusiastic about the split, but they want more answers than Symantec has right now, said Jon Oltsik, principal analyst at the Enterprise Strategy Group. Oltsik was in attendance at the partner event this week.

Symantec Partners want more information about how divestiture is going to work, whether there will be two channel programs or one and how customer contracts will be ironed out, Oltsik said. Partners that sell from both sides of the portfolio are more alarmed that their business could be deeply impacted by the split.

"The partners liked what they saw but they are holding a gun to Symantec's head and telling them to be very careful on their execution," Oltsik said. "They have to convince their clients who bought their products on a tactical product-by-product basis that there is value in this, but it's not the only game in town; there are ways that this could be done without Symantec."

PUBLISHED OCT. 17, 2014