Now that Symantec Corp. is seeking a buyer for its data-storage business, it’s discovering the division is almost as much trouble on the way out as it was on the way in.
After a decade of pressure to sell the business, created through the 2005 acquisition of Veritas, Symantec has approached possible strategic suitors including EMC Corp. and NetApp Inc. to gauge their interest in the unit, people familiar with the matter said.
Already, a sale is proving to be a challenge. Hurdles include the large size -- somewhere from $6 billion to $10 billion -- and the complexity of detangling the business from the rest of Symantec, said the people, who asked not to be identified discussing a private matter.
NetApp is interested but wary of making such a large bet on a low-growth company, the people said. With a market value of $11 billion, NetApp could almost double its size with the purchase. EMC isn’t interested, people familiar with the company’s plans said.
Symantec’s storage division generates cash flow but has low revenue growth, and shaping it up would require firing employees and shutting down product lines, said a person familiar with one of the companies who saw investment bankers’ presentations pitching a Veritas sale. That may make it a more likely deal for a private-equity firm than a rival storage vendor, another person said.
“We would view a financial buyer/private equity as the more likely route for Veritas given the nature of this cash-cow business, cost-cutting potential, and mature area of the tech food chain,” Daniel Ives, an analyst at FBR Capital Markets & Co. in New York, wrote in an e-mail.
“As we have seen with Veritas, EMC and NetApp, the legacy storage area has become increasingly more commoditized and faces a Kilimanjaro-like challenge to show growth over the next few years,” he said.
While it may be able to drum up interest from private-equity buyers, Symantec may decide not to go forward with a sale if executives decide that Veritas will fetch more in the stock market under a planned split of the company, the people said.
For years, financial analysts had been calling for Symantec to unwind the $13.5 billion purchase that former Chief Executive Officer John Thompson pushed for in 2005.
Symantec’s attempt to unload the Veritas assets was widely seen as inevitable after the company announced in October that it was splitting into two publicly traded companies, one focused on cyber-security and the other on storage.
When Mountain View, California-based Symantec announced the split, it said current CEO Michael Brown would remain CEO of the security business. A chief of the storage division wasn’t named and was seen by many as a sign that a sale was imminent.
Kristen Batch, a spokeswoman for Symantec, said the company’s split is on track to be completed this year and declined to comment on a possible sale of Veritas. A representative for NetApp didn’t return several calls and e-mails seeking comment. Dave Farmer, a spokesman for EMC, declined to comment.
There’s also a possibility that a buyer might emerge for the security business. Hewlett-Packard Co. previously held talks with Symantec about a purchase, though the computer maker’s own pending split could complicate a restart of those discussions, according to two people familiar with the matter.
Sarah Pompei, a spokeswoman for Hewlett-Packard, declined to comment on its interest in Symantec.
The practical challenges of selling Veritas underline how difficult the business continues to be a decade later. The storage business has a valuable family of products called Backup Exec that lets companies back up entire data centers that use “virtualized” servers, but it’s also saddled with legacy technologies that hold less appeal for potential buyers.
Symantec shares jumped 5.6 percent on April 10, closing at $25.58 in New York after the Wall Street Journal reported that its storage unit may fetch more than $8 billion in a sale.
The combination of security and storage was never an easy fit for Symantec. The logic was that consumers and businesses who pay for storage will also need security, and vice versa, and that the businesses would feed each other. It turns out that companies often don’t buy the technologies at the same time, and integration has been difficult.