Symantec's Thompson: "I Can't Wait To Compete..."
Once John W. Thompson sets a goal for himself, there isn't much that can deter him. On Nov. 5, the chief executive of security software giant Symantec Corp. (SYMC ) was scheduled to make the presentation of his career, a pitch to the directors of Veritas Software Corp. (VRTS ) on a takeover by his company that would be the largest software merger ever. He had arranged previously to have minor surgery that morning. But instead of the local anesthetic he was expecting, he was completely knocked out for the procedure. Still, after waking up in a fog at 10 a.m., he shook off the cobwebs and nailed his performance just three hours later. "A lot of other CEOs would have canceled. He didn't hesitate," says Gary Bloom, Veritas' chief executive. Thompson won the board's approval for the deal a few weeks later.
Thompson will need all the determination he can muster to face down the challenges ahead for Symantec. The 55-year-old is trying to complete the $13 billion Veritas merger in the face of Wall Street opposition, at the same time he's preparing Symantec for what's shaping up to be an all-out war with fearsome Microsoft Corp. (MSFT ) Wall Street analysts question the usefulness of pairing the leader in consumer and corporate security software with the leader in information storage software. Symantec's stock plunged 32%, to $23, in the week after the deal was announced in December. Rather than second-guessing himself, though, Thompson is forging ahead. "I'm not going to let Wall Street dictate or set the strategy for our company, I'm going to set the strategy," he says.
He isn't shying away from the battle with Microsoft, either. Sparks flew when he and Microsoft Chairman William H. Gates III took turns speaking at the tech industry's RSA Conference in February. Gates explained that Microsoft plans to deliver its first antivirus product this year, a subscription service aimed at consumers. Analysts expect it to enter the corporate security market next year. Gates called security "the top priority for Microsoft, the top priority in terms of our R&D, and the top priority in terms of our communications with customers." Thompson responded by taking a swipe at the world's richest man: "I could try to be like Bill and show you product demos and talk about our product road map, but I thought our time would be better spent if we took a more strategic view of what we do." Later, pressed about the brewing battle, he said: "I am the most competitive person in the world, and I can't wait to compete against Microsoft."
What's that, a death wish? Microsoft has decimated a long line of rivals, from Netscape Communications Corp. in Web browsers to Lotus Development Corp. in spreadsheets. Yet Thompson has had an astonishing run since he left IBM (IBM ) six years ago to take over Symantec. He sold off tangential products and fleshed out the portfolio with more than 20 acquisitions to build a suite of security products for businesses. When the computer virus plague hit in 2003, Symantec was ready, and its revenues surged more than 30% per year for the past two years. Meanwhile, chief rival McAfee Inc. overextended and ran into trouble. Symantec's stock has soared 1000% in six years -- to a peak of $34, before the merger news broke.
Thompson has at least a fighting chance of overcoming his challenges and creating a new powerhouse in the software industry. Sure, it will be brutal in the consumer antivirus business, where Microsoft could wreak havoc by undercutting Symantec on price. But if Thompson integrates Veritas effectively, he might be able to prove his critics wrong. For starters, the merger makes Symantec more diversified and less vulnerable to Microsoft's move into security. Beyond that, by combining the two, this gives Symantec the heft it needs to be seen by corporate executives as a strategic partner they can depend on for a wide variety of important products. "If anyone can integrate and make a success out of this acquisition, Thompson can do it," says Jason S. Maxwell, senior vice-president at TCW Group Inc., Symantec's third-largest shareholder.
Thompson's goal is to redefine the way corporate leaders think about security and information storage. His idea: As companies become ever more dependent on networks, the two markets will converge. He calls it the information integrity market. He plans on offering up a broad portfolio of interlocking products that handle everything from antivirus and incursion protection to data backup and storage network management. Thompson hopes that by the time Microsoft starts selling corporate security software, Symantec will have redefined the market, and Microsoft, which doesn't have storage software, won't be able to compete effectively with him.
Thompson is well prepared to duke it out with Microsoft. Raised in a working-class black family in segregated Florida, he was never discouraged by challenges or slights. Just the opposite. After he became one of the first in his high school to wear an afro, one of the administrators tried to publicly humiliate him. "He said I was nothing more than a thug and I would never amount to anything," recalls Thompson. He resolved to prove the guy wrong. His relentless drive propelled him into an impressive 25-year career at IBM, where he rose to run the then-$37 billion North American sales region.
At IBM he had helped position the software unit to move from laggard to the leader it has become. His main contribution, in the mid-1990s, was persuading makers of corporate software to design their products to work with IBM's middleware. Before that, many tech companies were beginning to focus almost exclusively on Microsoft's software. "He's battle-tested for what he's doing now," says John M. Thompson, former IBM vice-chairman and Thompson's boss in the mid-'90s.
Make no mistake, though: Microsoft's incursion is a serious threat. It will be able to use its Windows monopoly to get its antivirus software loaded onto nearly every consumer PC. Microsoft hasn't revealed its pricing plans, but if it undercuts Symantec's $24.95-per-year subscription price, it will likely gain substantial market share. And if it gives away the software -- though, that's unlikely because of antitrust issues -- it could quickly erode the market for Symantec and others. Symantec gets about 40% of its $2.6 billion in revenues from consumer antivirus products, making it far and away the largest player.
In the corporate world, Symantec has distinct advantages. Corporations look for software packages that cut across several operating systems. Because of Microsoft's exclusive focus on Windows, it won't offer a comprehensive package like Symantec does. So Symantec is likely to remain the go-to supplier for many customers who are deeply skeptical of Microsoft's ability to address the virus plague. "There are just too many bad experiences," says David Jordan, the chief information security officer for Arlington County in Virginia, a Symantec customer.
Experts figure Thompson has about one year to make his strategy work and gird for Microsoft. He's uncharacteristically curt when asked about Microsoft at press events and rolls his eyes when reporters bring it up. "How many times can I answer the question, 'How are you going to compete against Microsoft?"' he asks. He'd better get used to it. From now on, that battle will define both Symantec's future and his legacy.
By Sarah Lacy in San Mateo, Calif., with Steve Hamm in New York