Later, in April, The Wall Street Journal reported that Symantec was looking for potential buyers for Veritas. This was further confirmed by a Reuters report stating that the company had contacted NetApp Inc. NTAP, EMC Corporation EMC and several private equity firms in this regard.
We believe that the divestment is likely to streamline Symantec’s operations and maximize shareholders’ value. Renewed focus on the core business can also revive its operational performance.
The company expects to receive net cash proceeds of approximately $6.3 billion from the deal. While a portion of the proceeds will be returned to shareholders, the rest will be reinvested in the business.
Symantec has a lot to worry about at the moment, given the persistent weakness in PC sales that is hurting its core Norton Anti-virus software business. Other than the intensifying competition, this business has been dealt a severe blow by the increased usage of smartphones and tablets.
Many investors are skeptical about whether the spin-off would work in favor of this beleaguered company. The past decade has seen a host of new specialized security companies like Kaspersky and Quick Heal, making their presence felt. These companies will not leave a stone unturned to strengthen their position as the behemoth struggles to re-invent itself.
We believe that the deal will provide Symantec the much-needed funds to continue to expand its product portfolio and presence in the fast-growing markets.
Conclusion
Symantec does not have a long time to revamp and reorganize itself. The spin-off should be a good thing for the company, as it will drive more focus in its core business, which should translate into new products and a more focused sales team. These two factors in combination should lead to increased revenues and net income.
Currently, Symantec has a Zacks Rank #5 (Strong Sell).
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