In safe hands

MERGERS & ACQUISITIONS:A strategy of mergers, acquisitions and joint ventures have seen security giant Symantec take some new directions and rethink its core business

AS SECURITY GIANT SYMANTEC celebrates its 25th anniversary this year, chief executive John Thompson will be marking his eighth year at the company - eight years of turning the one-time comsumer-focused firm into a billion dollar-plus one-stop security shop for enterprises. It hasn't been an easy transition nor one without ongoing criticism.

The company once best known for selling the Norton line of home security products now has products and services that reach from the desktop to storage security, phishing attacks to regulatory compliance.

That diversity has been achieved almost entirely through a tough strategy of acquisitions - buying in what Symantec didn't have and boosting its capabilities by hoovering up competitors in areas where it already had a presence. That's added up to some large scale, costly acquisitions by Thompson that have been criticised at times by financial analysts, especially as some, such as Veritas, have taken longer to absorb into the company than others, delaying product launches and causing the company's finances to take a hit.

Thompson recognises, but shrugs off such concerns. "Investors like to have the lowest risk profile possible. Any time you acquire a large company, that increases the risk profile. It's rarely viewed favourably by investors. That's different from the question of what is needed to create a sustaining, ongoing franchise," he says.

"Often the concerns of investors are different from the concerns of management," he says.

Thompson is relaxed and genial, in Las Vegas for the company's annual user conference in June. He has new products to announce, always a bonus for chief executives at events like this, especially when the products noticeably incorporate technologies picked up in those high profile acquisitions.

He also reportedly gave a confident performance at the company's major analyst event, which generated positive response and upgrading of shares by several key analysts.

"We are a very acquisitive company and are always looking at ways we can expand the company," he says. "This has been an interesting journey for the company as we went through the experience of integrating Veritas and are well down the road of integrating Altiras."

"Interesting journey" refers to the fact that the slower-than-expected integration of Veritas caused Symantec shares to slide and the company to miss its own guidance for the end of the fiscal year.

But Thompson is not for turning. "We'll continue to spend 15 per cent of revenue on research and development. But you'll see us continue to acquire small technology companies and companies that have reached scale in markets we want to go into."

Symantec, he says, cannot ignore a major trend in the industry: consolidation. "Revenue is starting to slow, and what happens is large companies start to use their resources to buy up smaller companies. Either we use our resources to consolidate, or we shrink to inconsequence, and that's not going to happen while I'm here."

What has happened during his tenure has been a considerable restructuring and rethink of Symantec and its core business. When Thompson came to Symantec in 1999, after several decades with IBM, he replaced nearly all its senior management and about half of its 2,000 employees at the time.

Then the acquisitions began, slowly and steadily. And now, joint ventures as well.

One new direction for Symantec is its recent announcement of a joint venture with Chinese company Huawei to create security and storage products, placing the two in direct competition with Cisco. Huawei is China's biggest manufacturer of computer networking equipment.

"Our intent is to put people, tools and money into this area of the storage security market," Thompson says. "They will build the hardware and put our software in on top."

Thompson is unapologetic about moving some functions of the Silicon Valley company into other countries (nearly 1,000 people are employed by Symantec at its Dublin operations), including outsourcing. "It's a natural phenomenon," he says of outsourcing.

"Our initiatives around outsourcing have been based around our support business. We moved our US base from five-day, 10-hour support to seven-day, 24-hour support by outsourcing. That's a better option for our customers. We've also moved some of our engineering operations offshore, but that's more about finding talent. Access to all markets is important to us. We want to make sure we have engineering capability near to where markets are growing."

Overall, Symantec's strength, as Thompson sees it, is its ability to provide a range of interlocking technologies that are built on industry standards - meaning they will work together even with competitor's products, as long as they too are standardised.

Thompson thinks companies are looking for more depth in security products and hence are willing to pay a premium for suites of security technologies of the sort Symantec laucnched in Las Vegas.

"I think companies are going to have to deliver more security to people rather than expect them to show up secure," he says.

And Symantec, of course, can enable companies to do just that. If they turn in large numbers to Symantec's new products for help, Thompson's growth strategy will be vindicated.