Selling Veritas reflects the company’s strategy of refocusing itself on the security market while lessening its dependence on antivirus. Hiring 65 engineers and data scientists from Boeing Co.’s Narus security division earlier this year was also in line with its strategy. These engineers and scientists are specialized in making network-monitoring technologies used by the U.S. government. Veritas offers a wide range of data backup and recovery, and storage management products to approximately 75% of the Fortune 500 companies. In 2005, Symantec acquired Veritas for roughly $13.5 billion in an all-stock deal. However, the merger did not live up to Symantec’s expectations as slowing PC sales hurt the security business, while sluggish demand for storage and data management products affected Veritas. The current valuation of the company’s data storage unit is a considerable decline from its acquisition price of $13.5 billion. Therefore, last year in October, Symantec announced its decision to split the data-storage and cyber security businesses into two publicly traded companies. In January, the company further stated that, following the split, it will operate as two separate entities — the security business and the information management business Later, in April, The Wall Street Journal (WSJ) reported that Symantec was looking for potential buyers for the Veritas business. This was also confirmed by a Reuters report stating that the company had contacted NetApp Inc. NTAP, EMC Corporation EMC and several private equity firms in this regard. We believe that the divestment is likely to streamline Symantec’s operations and maximize shareholders’ value. Renewed focus on the core business can also revive the company’s operational performance. The company expects to get net cash proceeds of approximately $6.3 billion from the deal, which is expected to close by Jan 1, 2016. While a portion of the proceeds will be returned to shareholders, the rest will be invested in the business. In this regard, Symantec’s board approved an additional $1.5 billion share repurchase program, bringing the total authorization to $2.6 billion. Out of this, the company will return nearly $2 billion within 18 months following the completion of the deal. The board has also maintained its quarterly cash dividend of 15 cents per common share. The company in its press release says that “Between its dividend and share repurchases, Symantec expects to return about 120% of its after-tax domestic cash proceeds from the sale to its shareholders”. Symantec has plenty to worry about at the moment, given the persistent weakness in PC sales that is hurting its core Norton Anti-virus software business. Other than the intensifying competition, this business has been dealt a severe blow by the increased usage of smartphones and tablets (including Apple’s AAPL iPads). Many investors are skeptical about whether the spin-off would work in favor of this ever-troubled company. The past decade has seen a host of new specialized security companies like Kaspersky and Quick Heal, making their presence felt. These companies will not leave a stone unturned to strengthen their position as the behemoth struggles to re-invent itself. We believe that the deal will provide Symantec the much-needed funds to continue to expand its product portfolio and presence in the fast-growing markets. Conclusion Symantec does not have a long time to revamp and reorganize itself. The spin-off should be a good thing for the company, as it will drive more focus in its core business, which should translate into new products and a more focused sales team. These two factors in combination should lead to increased revenues and net income. Currently, Symantec has a Zacks Rank #4 (Sell). Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >> Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report SYMANTEC CORP (SYMC): Free Stock Analysis Report APPLE INC (AAPL): Free Stock Analysis Report EMC CORP -MASS (EMC): Free Stock Analysis Report NETAPP INC (NTAP): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research
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