Today's WSJ Article - SYMC vs. NETA
Symantec , Network Associates Trade Places By Lee Gomes
08/19/1999
The Wall Street Journal
Page B6
(Copyright (c) 1999, Dow Jones & Company, Inc.)
As reversals of fortunes go, it's been one of the computer industry's most spectacular.
At the start of the year, the two dominant makers of software for combating computer viruses , Network Associates Inc. and Symantec Corp., seemed on two different escalators. Led by a hard-charging chief executive, Network Associates had a dominant share of the corporate marketplace and a lofty market capitalization.
Symantec , by contrast, was well-known in the consumer market because of its Peter Norton brand. But it had a stagnant position in the much larger corporate market and a stock that seemed forever in the doldrums.
The biggest thing the two companies had in common was a longtime enmity toward each other, evidenced by many years spent hurling invectives, and occasional lawsuits, between their Silicon Valley headquarters.
Suddenly the picture is inverted. Because of a stunning stumble, Network Associates has lost more than two-thirds of its stock-market value since the beginning of the year, or nearly $7 billion. Symantec , meanwhile, has been on a steady ascent; at a market capitalization of about $1.65 billion, the company is within striking distance of its $2.32 billion rival.
The flip-flop marks a stellar debut for John W . Thompson , named to the top job at Symantec in April following a lengthy career at International Business Machines Corp., where he had headed North American sales. Mr. Thompson succeeded Gordon Eubanks, a software-industry pioneer who stepped aside in January so new blood could be brought into the Cupertino, Calif., company.
A few miles away in Santa Clara, the mood is less upbeat. Network Associates, which recently bought rights to put its name on the ballpark used by the Oakland A's, still is suffering from missing Wall Street expectations for the quarter ended March 31, its first disappointment in 22 quarters.
Bill Larson, Network Associates' chief executive, blames the miss on a general business slowdown caused, in part, by year-2000 computer-glitch concerns. But other companies in the same market saw no such slowdown. Many analysts contend that Network Associates paid the price for trying to meet its sales goals by delivering more products than its distributors could use, a practice called "stuffing the channel." The company won't discuss that issue, citing a host of shareholder suits filed since the April crash.
Whatever happened, Network Associates certainly seems to have spent the second quarter clearing out inventory; for the period, sales came to a virtual halt, falling to $25.1 million from $261 million in the year-ago quarter. And the former highflier has a sizable credibility problem on Wall Street.
"Six months ago, Network Associates could do no wrong," says Steven B. Frankel, an analyst at Adams Harkness. "But looking back, it was smoke and mirrors."
Mr. Larson, not surprisingly, doesn't go along with that characterization. But he isn't about to issue a timetable on a recovery, eschewing predictions in view of the shareholder lawsuits Network Associates faces. The task before the company, he said, is "to put up some very strong numbers."
Both companies, moreover, would like to shift attention from their rivalry, if for entirely different reasons. Symantec 's new CEO, for example, contends that its previous concentration on the big competitor distracted its focus from corporate customers.
"I don't want to be preoccupied with Network Associates, even though there has been a history of that here," said Mr. Thompson. "You're not going to see a lot of street fights out of me."
Mr. Larson contends that Network Associates has outgrown its antivirus roots, and is now in a different league from Symantec . By assembling antivirus and other products into a single "suite" of interoperating offerings, "we are cutting new ground in the security market," Mr. Larson says. Regarding Symantec , he says, "they are our past."
Still, antivirus programs represent the core offering at both companies, accounting for roughly 40% of each outfit's revenues, according to International Data Corp. But while Network Associates has used acquisitions to extend its product line, Symantec has done so with partnerships. One example is its work with Check Point Software Technologies Ltd., a leader in the market for "firewalls," which protect corporate networks from intruders. Moreover, Symantec counters that the suite approach works in desktop applications but not in the security market, where it believes customers want the best possible stand-alone products.
Besides security products, Symantec offers the well-known Norton PC utility programs and other products to help mobile professionals with laptops link up with the home office. Mr. Thompson plans to use his extensive boardroom ties from his IBM days to deepen Symantec 's position inside companies. IBM already is an ally in that effort, thanks in large part to a deal signed by Mr. Eubanks before his departure.
Industry watchers say the strategy is working. " Symantec is making a number of fairly aggressive moves in the corporate space," said Abner Germanow, with IDC. Among the recent corporate wins at Symantec are Caterpillar Inc. and PeopleSoft Inc.
Some analysts, such as Mr. Frankel of Adams Harkness, believe that Symantec 's partnering approach will serve it better in the long run than Network Associates' go-it-alone stance. Mr. Frankel, in fact, believes Symantec now has the capacity to pull ahead of Network Associates in market value.
Not everyone shares that view; some believe the gap between the two companies will widen again as Network Associates puts time between it and its springtime stumble. "They took some very strong medicine in the second quarter, and the back half of the year looks pretty good," says John F. Powers of BancRobertson Stephens.
Mr. Larson notes that most big Silicon Valley companies have had to battle back from a major slump at some point in their histories. "It's certainly not pleasant, but it's a fact of life," he said. |
