Mon, Aug 23, 2010 page11

• Symantec still needs alliances, to vie with Intel

  UNDER PRESSURE Intel’s purchase of McAfee is likely to force Symantec to reassess its market strategy particularly in the area of alliances with other firms

  • LOOMBERG
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  Intel Corp’s US$7.68 billion purchase of McAfee Inc may put pressure on security software rival Symantec Corp to build hacker-thwarting technology inside corporate computers and forge new alliances to stay competitive.

  Thursday’s deal signals a shift in the global security software market, where sales will reach US$16.5 billion this year, according to Gartner Inc. As consumers and businesses connect more personal computers, servers, smartphones and other products to the Web, McAfee will let Intel build protection programs into those devices’ chips, improving performance and making systems harder to attack.

  NEW PARTNERSHIPS

  Symantec should strike new partnerships with diversified technology suppliers such as Hewlett-Packard Co, International Business Machines Corp and Oracle Corp, said James Covello, an analyst at Goldman Sachs Group Inc. The company also needs to broaden its line of network security products that defend corporate computers, analysts said.

  Symantec has “stayed away from network security,” said Brent Thill, an analyst at UBS AG in San Francisco.

  That has left the Mountain View, California-based company ill-equipped to contend with Cisco Systems Inc, Juniper Networks Inc and Check Point Software Technologies Ltd, “who are dominant vendors,” he said.

  Erin Roche, a spokeswoman for Symantec, said in an e-mail that Intel’s purchase of McAfee “emphasizes the growing relevance and need for security protection that extends beyond the PC.”

  Symantec, the largest supplier of security software, has tried to gain a bigger foothold in corporate data centers with mixed success. In 2005, it paid US$10.2 billion for data-center storage company Veritas Software Corp, which has disappointed investors. Symantec has bought 21 companies since then.

  “Their thirst for acquisitions derailed what would have been a sound product strategy,” Daniel Ives, an analyst with FBR Capital Markets said.

  HP, IBM, and Oracle may favor some sort of alliance with Symantec rather than acquiring the company since they don’t directly compete with Intel, said Covello, who is based in New York.

  “We’d expect these companies to prefer a partnership route with larger vendors such as Symantec,” Covello wrote in a note on Thursday.

  Under Enrique Salem, who has been chief executive since April last year, Symantec has been grappling with slowing growth in its storage business and competition from McAfee in the corporate security market. Last month, Symantec forecast sales and profit that missed analysts’ estimates.

  Intel plans for Santa Clara, California-based McAfee to continue as an independent company run by its current chief executive officer Dave DeWalt. While the acquisition is Intel’s largest, it’s unlikely to be the chipmaker’s last in the security arena.

  ACQUISITION TARGETS

  “The tech industry’s trying to consolidate the space into a one-stop shop,” Thill said. “I don’t think Intel’s done buying security software.”

  Analysts have cited Fortinet Inc, Sourcefire Inc, Websense Inc, and Check Point Software Technologies as possible future acquisition targets by Intel, which had about US$18 billion in cash at the end of the second quarter.

  McAfee, under its new owner, has “an open checkbook to buy more companies,” Thill said.
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