Home Industry Listed Tech Symantec dons a Blue Coat

Symantec dons a Blue Coat

Symantec will pay US$4.65 billion in an all-cash deal to buy privately-held Blue Coat to ramp up its enterprise security offerings.

Symantec is best known for its Norton range of antivirus/malware products. But it has a large range of corporate/enterprise offerings that can be overshadowed by its consumer product.

"Blue Coat brings capabilities from the web and for network-borne threats, which combined with what we already offer will provide better protection for our customers," said Ajei Gopal, Symantec's interim president and chief operating officer.

The addition of Blue Coat offerings will boost the combined company's portion of enterprise revenue to 62% and better position it to compete with enterprise platforms such as Palo Alto Networks, FireEye, and Check Point Software Technologies. Symantec will now have $4.4 billion in combined revenue.

“Symantec has no immediate plans to sell its consumer unit,” Thomas Seifert, the chief financial officer, said.

Blue Coat’s chief executive Greg Clark will become Symantec's CEO. The previous incumbent, Michael Brown, left in April after the company reported disappointing quarterly results.

"With employees of Blue Coat and Symantec coming together, we will be well positioned to drive meaningful growth and push the boundaries of innovation. I am very excited about the opportunity to join Symantec as CEO and look forward to working with the strongest, deepest team in security to realise the many strategic and financial benefits this transaction will create," Clark said in a statement.

“Together, we will be best positioned to address the ever-evolving threat landscape, the massive changes introduced by the shift to mobile and cloud, and the challenges created by regulatory and privacy concerns,” Dan Schulman, chairman of Symantec, said in a statement.

Blue Coat had been preparing an initial public offering. Private equity owner, Bain Capital acquired Blue Coat Systems from fellow private-equity firm Thoma Bravo for $2.4 billion last year.

Symantec’s stock rose more than 5% after the announcement. The transaction is expected to close by the end of Q3.

Comment

There is an old maxim that by combining two strong companies you make a stronger one. The fact is that Symantec is strong, and Blue Coat has lost US$289 million on top of US$598 million in sales for the 12 months that ended 30 April. That compares with a US$271 million loss on top of nearly US$569 million in sales for the corresponding period a year before. It has approximately 15,000 enterprise customers to Symantec’s 370,000 enterprise customers. Cross-selling will be the key here; yes, they are banking on the combined entity doing better than they could alone.

The combined organisation has little product overlap – Symantec has tended to concentrate on on-premises security, while Blue Coat has emphasised web and cloud security.

But the market is changing. Analyst Joel Fishbein said the deal brings immediate benefits for SYMC:

  • increased enterprise security exposure, as pro forma enterprise security revenues increase to 62% of the base (vs. ~54% as of FY16);
  • better focus on higher growth security segments (Gartner estimates that 85% of large enterprises will be using cloud access security brokers, vs. <5% today);
  • significant accretion, as FY18 EPS is expected to jump to $1.70-$1.80 vs. $1.37 prior (+28%); and
  • a new chief executive in Greg Clark with a deep software background and proven track record of turning around and growing an enterprise-focused security company.

“On the surface, the transformative deal looks like a good one. However, there are obvious risks around a transaction of this size, notably the product and sales integration required, and if this can truly position SYMC to achieve its goal of being the leading enterprise cyber security company,” Fishbein said.

Other analysts say that enterprise threats have been evolving faster than Symantec – it does great, if not the best, PC/SOHO products but its end-point models were not coping with the cloud and mobility in the enterprise. Blue Coat's networking and cloud-based security software and encryption are seen as competent enterprise suites. The combined research and development budget should make a big difference to the company offerings.

Scott Robertson, vice-president, Asia Pacific and Japan, Zscaler, has a different view. "While Symantec’s intent to buy Blue Coat validates the need for secure web gateway solutions, it does not align with where the market is going because it is essentially just a consolidation of the old paradigm – legacy appliances and on-premise software. With a distributed mobile workforce moving data and applications to the cloud, neither endpoints nor appliances are enough to keep enterprises secure today. The only viable way forward is a purpose-built cloud security platform to eliminate the need to buy, deploy and manage security appliances.”

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Ray Shaw

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Ray Shaw ray@im.com.au  has a passion for IT ever since building his first computer in 1980. He is a qualified journalist, hosted a consumer IT based radio program on ABC radio for 10 years, has developed world leading software for the events industry and is smart enough to no longer own a retail computer store!