Broadcom to pay $10.7 billion for B2B security products and services; Symantec cuts costs through workforce downsizing
Symantec is no longer an enterprise security vendor. In the minutes following Wall Street’s closing bell this afternoon, Broadcom announced the deal to buy Symantec’s enterprise unit for $10.7 billion in cash. The acquisition leaves Symantec with its small-business and consumer products while reshaping the security industry and channel landscapes.
The Lowdown: Under the terms of the deal, Broadcom will take ownership of Symantec’s enterprise offerings, which include endpoint security, data loss prevention (DLP), Web gateway security, cloud access security broker (CASB) technology, e-mail security solutions, and managed security services. Broadcom will also take ownership of the Symantec name in association with the products.
Symantec will retain its small-business and consumer products, which will likely include its SMB and retail channel partners. Symantec’s management doesn’t say how it will operate after the acquisition closes but makes several references to its Norton LifeLock branded products as the core of its future portfolio. Symantec says the consumer business contributes 90% of the company’s net earnings.
The Details: Broadcom plans to incorporate Symantec into its growing portfolio of infrastructure products and services. By bundling Symantec security with its other products and selling through its existing and expanded channels, Broadcom believes it will capture more customers and scale Symantec’s enterprise installed base.
Broadcom will pay cash for the Symantec assets; Symantec says all of the post-tax proceeds of the deal will go to shareholders. Symantec anticipates between $1 billion and $1.5 billion in additional restructuring costs, which it will cover by downsizing staff by 7%.
Symantec will continue to operate the enterprise business until the deal closes, which the two companies expect will happen within the next two quarters pending regulatory review.
The Impact: The precise impact of the Broadcom acquisition of Symantec is indeterminable at this point, particularly from a channel and partner perspective. Broadcom and Symantec will have to untangle the Symantec enterprise and SMB channels, redeploy staff and resources, and realign customer contracts.
What’s known is the deal will reshape the security industry. Symantec is the world’s largest pure-play security vendor. With the enterprise unit separation, Symantec will slip in the size ranking, conceding the title to rival McAfee.
Background: Reports that Broadcom was looking to buy all of Symantec for $24 billion started circulating in early July. The initial deal fell apart because Symantec reportedly wanted a premium price for the company and its assets. Broadcom and Symantec surprised the market yesterday when reports surfaced that Broadcom was in talks to acquire the enterprise business. Symantec has been under pressure for the better part of the past year following a self-reported review of financial reporting irregularities and the sudden departure of CEO Greg Brown.
The Buzz: “M&A has played a central role in Broadcom’s growth strategy, and this transaction represents the next logical step in our strategy following our acquisitions of Brocade and CA Technologies,” said Broadcom CEO Hock Tan. “Symantec’s enterprise security business is recognized as an established leader in the growing enterprise security space and has developed some of the world’s most powerful defense solutions that protect against today’s evolving threat landscape and secure data from endpoint to cloud. We look forward to expanding our footprint of mission critical infrastructure software within our core Global 2000 customer base.”
“This is a transformative transaction that should maximize immediate value to our shareholders while maintaining ownership in a pure play consumer cyber safety business with predictability, growth, and strong consistent profitability. In addition, it allows the Enterprise Security business to grow and compete on an enterprise platform with a worldwide sales and distribution reach which can service our existing customers,” said Rick Hill, interim president and CEO of Symantec. “It also allows our Norton LifeLock business, a world-recognized leader in consumer and small business cyber safety, to operate independently and give investors a clear understanding of the growth opportunity and strong financial performance.”
“This $10.7 billion agreement to sell our Enterprise Security assets to Broadcom delivers significant value to Symantec shareholders,” said Vincent Pilette, executive vice president and CFO at Symantec. “In addition, we have identified approximately $1.5 billion of annual run rate expenses which we plan to eliminate over the next 12 months at a cash cost of approximately $1 billion. We believe these cash costs will be materially offset by the sale of underutilized assets such as real estate. We are focused on disciplined execution, developing a cost structure that allows us to fuel growth and continue innovation in our consumer business.”