Symantec Confirms Split – Two Dogs Is Better Than One Dog

Michael A. Brown, Symantec president and CEO, claims that separating Symantec into two independent publicly traded companies will provide each business the flexibility and focus to drive growth and enhance shareholder value.

The problem that we have with this is that this is a corporate unwinding of what was cobbled together ten years ago. What was two growth engines became one maturing company. The company is effectively now saying that two dogs is better than one dog.

The separation is said to allow each company to focus on its unique growth opportunities, R&D investments, and go-to-market capabilities. It will also enhance strategic flexibility allowing each company to pursue partnerships, and develop independent merger and acquisition strategies. It seems that the split would turn the current Symantec back into the old data security play that it was and would move Veritas back out of the company.

Symantec had a market cap of $16.2 billion when we addressed the first time this week. Take a walk in history here — Go all the way back 10 years to the end of 2004. At that time, Symantec agreed to acquire Veritas Software for its data storage and management solutions for some $13.5 billion. Symantec would own roughly 60% of the combined company at that time.

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And what about its stock ten years ago? Symantec shares were close to $28 at the time and had just challenged $30. This stock had risen in a straight line from 2002 to 2004, rising from about $5 to $30 if you adjust for stock splits. For those who recall witnessing this merger live at the time, one recollection stood out after Symantec’s shares cratered on the M&A news: Symantec’s merger with Veritas broke its majorly uptrending chart. Then the stock went in short order down to under $20, and in the years following the debacle investors made money hand over fist buying when Symantec got close to $15 and selling each time got back near $20.

Now take history forward, and the new trading range seems to be $20 to $25. Again, the market cap was a mere $16.2 billion when we first evaluated this split up potentiality this week. Despite the growth of storage and despite the need for data security, Symantec’s stock price has never really recovered to where it was before the Veritas deal was announced — from 2004 to 2014, no real gains.

Investors will have to hope that this works. Unfortunately, Symantec alone or a move back to the old Symantec and the old Veritas may have the same result. Storage is simply not the growth engine that it used to be. Data security should be a major opportunity for the likes of Norton and other offerings, but let’s be nice and call security a very crowded space.

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Symantec’s stock was down 2.37% at $23.44 on Thursday afternoon, against a 52-week range of $17.95 to $25.60. With a 1.1% rise in the after-hours on the news, Symantec shares were around $23.70 — and it has a consensus analyst price target of $24.25.

No one seems very excited here. There is probably the reason we worry about — two dogs or one dog? It leaves a great migration into a joke about how people get their names, but we’ll skip that one. Two dogs…