Symantec Acquires Blue Coat: A $4.65 Billion Bet on Cloud Computing and Blue Coat’s CEO

by Trefis Team
-8.51%
Downside
23.51
Market
21.51
Trefis
SYMC
Symantec
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Symc-blue coat 1

 Trefis Observations:

1) Little overlap in the two companies’ products is a major advantage:

  • Symantec is in the nascent stages of expanding to cloud-based security software, while Blue Coat specializes in web and cloud security.
  • The minimal overlap between the two companies’ products provides a significant advantage to the combined entity, since there will not be any redundant product lines to cull or combine.
  • Blue Coat is a market leader in cloud security with non-GAAP revenues of $755 million and non-GAAP EBITDA margin of 24%. Its top-line grew by 17% year on year in FY16, led by a strong product pipeline, sustained net new customer acquisition and a 95% customer retention rate among its 15,000+ customers.
  • Blue Coat’s strong financial performance is likely to provide a boost to Symantec’s enterprise security software business and provide substantial cross-selling opportunities.
  • The transaction will make Symantec the world’s largest enterprise security software company by revenue.

2) A $4.65 billion bet on cloud computing and Greg Clark

  • Following the acquisition, Blue Coat’s CEO Greg Clark will take over the CEO role at Symantec, which has been lying vacant since April.
  • This suggests that the purchase is as much a matter of acquiring Blue Coat’s products as it is for roping in the company’s leadership.
  • Greg Clark is a turnaround specialist who has worked wonders at Blue Coat. But it remains to be seen if he can work the same magic at a lumbering behemoth like Symantec.

3) Transaction welcomed by investors and analysts alike

  • Symantec’s share price has jumped by over 18% since the announcement of the transaction.
  • Private equity funds Silver Lake and Bain Capital have doubled down on their bet on Symantec by infusing a combined $1.25 million in convertible debt. This suggests a strong vote of confidence by the strategic investors in Symantec’s future following the transaction.
  • Multiple analysts have upgraded their view on Symantec’s stock, further underscoring the confidence in the landmark acquisition.

Bottom line: Symantec’s enterprise security software division is likely to reap significant benefits from the acquisition, but can the new CEO successfully repeat his turnaround prowess and rescue the floundering consumer security division?

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Symantec

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