Symantec (NASDAQ:SYMC) is one of the leading players in storage software, anti-virus software, online authentication software and online verification certificates. We currently have a $29 price estimate for Symantec, which is almost 30% higher than its current market price.
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While Symantec’s most popular brand is its Norton anti-virus line of security software, the biggest division in terms of value is the storage software division. The storage software division consists of software that is used to manage and help customers simplify and standardize data center processes. It also helps them in making efficient use of their storage hardware investment.
Storage hardware provides permanent storage of information and programs for retrieval by the computer. The division accounts for ~40% of the total company value, according to our estimates. While Symantec has been losing market share in the storage software market, we expect it to slightly improve going forward. Below we take a look at the storage software division.
Continued Growth In The Storage Software Market
With rising Internet penetration, users are able to exchange larger amounts of data as well as indulge in heavier data-driven Internet activities like watching movies, downloading songs and uploading photos. This comes with the growing use of remote storage services like iCloud, Dropbox, Skydrive and Google Drive, which in turn use data centers.
The huge growth in the number of tablet and smartphone users is leading to higher consumption of digital content, which is dependent on network attached storage. Further, more businesses are deploying cloud computing environments in an effort to pool resources and cut costs. Big data analytics is also boosting storage requirements to store and analyze heaps of data. An increased focus on data backup, data resiliency and improving operational efficiencies is also driving demand for storage software and managed services. All of these factors are leading to phenomenal growth in the amount of data generated and stored on data centers.
Gartner expects the worldwide storage software market to grow by 8% over the next two years.  Data protection and recovery software, and storage & device management software are the two fastest growing sub-markets, as companies look for new features that enable modern data protection and efficient storage and device management. Archiving software, storage infrastructure software, and storage replication software are witnessing reduced investment.
Symantec To Improve Its Market Share
Symantec has been consistently conceding market share for the last couple of years even as it is currently the third biggest player in the storage software space after market leaders EMC and IBM.
Symantec’s market share slipped to below 15% in 2012, from ~20% in 2008. This was due to significant competition from IBM and especially CommVault, in the data protection and recovery software sub-market where Symantec was the distant leader earlier. CommVault benefited from its array-based snapshot management software as snapshots and replication are becoming a primary means of data protection.
While Symantec currently supports only NetApp’s array for its array-based snapshot management software Netbackup, CommVault has support for arrays from almost all of the large companies including EMC. In addition, the archiving software sub-market, another strong area of Symantec, grew at a slower rate than the overall storage software market. EMC’s purchase of Data Domain in 2009 also bridged the gap with Symantec, which boasted of its de-duplication software technology at that time.
However, we expect Symantec to slightly improve its market share going forward as it is expected to add support for more platforms for Netbackup. Further, Symantec acquired LiveOffice, a cloud-based enterprise email archiving company in 2012. LiveOffice enables customers to archive and manage their email on-premise, and also allows them to host it remotely in the cloud. Further, Symantec also acquired Clearwell Systems, one of the leaders in the eDiscovery market. The eDiscovery software market is growing at a rapid rate.
As data movement continues to surge, the biggest challenge for customers is the ability to categorize and discover data efficiently aside from protecting and backing it up. According to Gartner, the eDiscovery software market is growing at 14% and is estimated to reach $1.7 billion by 2014.  By integrating Clearwell and LiveOffice’s offering with its own Enterprise Vault, Symantec now offers a complete email protection, security, archiving and discovery solution. This should help Symantec going forward.
However, the competition is also rising with Dell entering into the market after acquisition of data protection specialist firm AppAssure and Quest Software, and its vRanger and NetVault backup/recovery products. However, we expect it to hurt CommVault more than Symantec. Dell has been a major reseller of CommVault’s software Simpana, and therefore would likely promote its own software going forward. However, should the increasing competition continue to weigh on Symantec’s market share, there would be downside to our price estimate.Notes:
- Forecast: Storage Software Markets, Worldwide, 2009-2016, 4Q12 Update, Gartner, Feb 6 2013 [↩]
- Symantec to Acquire Clearwell Systems, Symantec, May 19 2011 [↩]