A Win-Win at Symantec

07/25/2016 7:00 am EST


Rob DeFrancesco

Founder, Tech-Stock Prospector

Rob DeFrancesco, editor of Tech Stock Prospector, specializes in high technology, covering growth stocks in areas such as the cloud, social media and, as is the case with this recent featured stock, online security.

Big changes are coming to Symantec (SYMC).  Its $4.65-billion acquisition of privately-held networking security vendor Blue Coat looks promising in terms of jumpstarting revenue and earnings growth.

Blue Coat, a leader in Web security, has invested more than $500 million in recent years development related to cloud security.

The acquisition makes sense for a number of reasons. First off, the deal provides a top-line growth boost, something Symantec desperately needs.

From a technology perspective, there is very little overlap when it comes to product coverage because Symantec is mainly focused on antivirus endpoint protection.

Adding Blue Coat to the mix automatically transforms Symantec into more of a platform play, a strategically smart move since an increasing number of enterprises now prefer to buy most of their security solutions from a single vendor.

Symantec also scores in that it gains an experienced, security-focused CEO with the deal, as Blue Coat’s Greg Clark will take over the top spot once the transaction is completed.

RBC Capital applauds that move, saying Clark has the technical expertise required for the job and knows how to scale a business both on the product side and cost side.

The acquisition received the full support of Silver Lake Partners (managing partner Ken Hao joined Symantec’s board in early March), which agreed to invest an additional $500 million in Symantec, taking the firm’s total investment to $1 billion.

Bain Capital, Blue Coat’s majority shareholder, is reinvesting $750 million in the combined company.  David Humphrey, a Bain managing director, will join the Symantec board.

Wall Street has generally gotten behind the deal, citing improved growth prospects. In our view, proper execution could make this M&A move a real win/win.

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