Wednesday, August 25, 2010

Symantec: Intel-McAfee merger may force to sell

Symantec, a security and storage software vendor in Mountain View, California, may feel pressure to sell following Intel’s announcement that it would purchase McAfee. Intel, a chipmaker with a monopoly on processors for the PC industry, announced that it would enter a new business by purchasing the a security software provider for $ 7.7 billion.

This is now leading to widespread speculation that others in the security space could find buyers in unexpected places. Symantec’s stock has been going up on merger speculation.

The company is rumored to be considering a split of its storage and security businesses, may be especially vulnerable to a takeout as it competes with the much larger McAfee following the Intel integration. Symantec buyers could emerge from the likes of IBM, Microsoft, or Hewlett-Packard as they experience a shifting technology landscape and a squeeze on the PC sector.

Intel agreed to purchase McAfee, though the chipmaker “knows nothing about the security business,” because the world is moving from personal computers to mobile devices, which require simpler processing than Intel’s famous x86 chips. Intel was squeezed, and it has a ton of cash. Dell, a maker of laptops, is also squeezed, and the banker noted that it agreed to purchase 3Par, a developer of virtualized storage arrays, for $1.15 billion last week to diversify. Only to find out few days later, HP offered 33% premium to Dell's bid.

Symantec is in the early phases of considering a split of its storage and security businesses because the two divisions lack synergies, and storage drags down Symantec’s trading multiple compared to peers. If Symantec should decide to sell, it’s easier if the storage and security become separate companies, unlocking the hidden shareholdr value from both businesses.

Symantec’s market capitalization is $10.6 billion. It recorded flat revenue of $1.4 billion for the quarter ended 2 July 2011 compared to the same quarter last year. Net income more than doubled to $161 million per share from $74 million the prior year.

Tell your colleagues your first heard it on and follow @TheAkbasPost

No comments: