New deal highlights tech linkage
__________________________________
by Cheryl Meyer
TheDeal.com
Posted 05:22 EST, 14, Dec 2004
As information technology burrows ever deeper into society, and especially in corporate America, developers of computer security and storage systems have flourished in recent years.
Now these companies are starting to converge in what is building into a major wave of consolidation.
Sources confirmed Tuesday, Dec. 14, that security software giant Symantec Corp. is in talks to buy storage technology vendor Veritas Software Corp. in a deal, first reported in The New York Times, that could reach $13 billion.
The merger would punctuate this integration of computer security and data storage. Yet other deals show that the trend has been gathering steam.
This year, for example, storage giant EMC Corp. bought Dantz Development Corp., a maker of backup products; Mountain View, Calif.-based Veritas completed its $225 million cash acquisition of KVault Software Ltd., a developer of e-mail archiving software; and security specialist Computer Associates International Inc. bought Netegrity Inc., a vendor of identity and access management software, for $430 million in cash. In another recent transaction, Symantec in December 2003 acquired PowerQuest Corp., a provider of backup technology, for $150 million.
"Security and storage are intertwined," said Don More, a partner at investment bank Updata Capital Inc. "Both are critical pieces of the infrastructure. Both are affected by issues of compliance. Vendors are looking for one-stop shopping in the infrastructure space."
In weighing a deal for Veritas, Cupertino, Calif.-based Symantec, best known for its Norton antivirus software, also is seeking to diversify its offerings.
"The transaction is being driven by Symantec's desire to reduce their reliance on the antivirus market," said Kevin Buttigieg, an analyst with A.G. Edwards & Sons Inc. in New York.
Security companies aren't the only tech players getting in the storage game, with titans such as Hewlett-Packard Co. and IBM Corp. also making storage acquisitions.
"The whole storage software industry is maturing, and with that comes consolidation," said Bill North, research director at IDC. "The guys that offer the integrated solutions, like Veritas, EMC, Computer Associates, HP and IBM, are out looking for ways to broaden and diversify their offerings and, probably as important, to gather into the fold a relatively scarce talent pool."
According to a new report by IDC, in the third quarter the worldwide storage software sales market grew 19.1% to $1.9 billion, compared with the year-ago period.
The major storage subsectors also posted double-digit revenue growth in the third quarter. For instance, the market for storage resource management technology, which helps companies manage devices such as disk and tape drives, posted the largest gain at 27.3% year-over-year growth. The backup and archive software market continued to represent the largest functional market, growing 17.4%. The markets for storage replication software, a tool used in disaster recovery, and file system technology, which allows companies to organize their files, also enjoyed strong results in the third quarter, with 13.7% and 10.3% year-over-year growth, respectively, IDC reported.
EMC, Veritas' largest competitor, led the overall market this quarter, with a 31.8% share of revenue.
Sources said a Symantec deal for Veritas could spur other acquisitions.
"If this deal goes through, that will pressure other players like IBM, EMC and HP to strengthen their offerings in security, which is complementary," More said. "Other large vendors, like McAfee [Inc.] and Trend Micro Inc., will also face some pressure to broaden their offering." |
