SAN FRANCISCO -- Symantec's John Thompson calls himself a "simple sales guy," but he will also have to be an extraordinarily effective one in coming months, as he sells stockholders on the notion that his company's $9.4 billion acquisition of Veritas Software makes sense.
So far, Wall Street has been skeptical. The acquisition's news made Symantec's stock nosedive. It is down 30 percent since the deal, expected to be completed in June, was announced. But even if he can win skeptical investors over, Thompson, the company's chairman and chief executive officer, will have a few other sales jobs ahead of him. He must convince his enterprise customers that the merged company will be nimble enough to meet their needs, while he fends off a direct assault from Microsoft, which has pledged to compete with Symantec in the desktop security market.
Speaking at the Veritas Vision 2005 conference here Wednesday, Thompson said that his first priority is making the Veritas acquisition work, and promised Veritas and Symantec customers would see common user interfaces and licensing within six months of the merger. But he didn't rule out other acquisitions, including one in the network management space. "If we see a way in which we can further distinguish ourselves by adding network management, we won't back away from it," he told show attendees.
In an interview with IDG News Service conducted just before his keynote, the former IBM Corp. executive discussed the sales job ahead of him and shared his thoughts on the future of both his company and the industry that has sustained it for nearly 25 years. Thompson also said that he, along with the rest of the industry, was going to keep a close eye on Microsoft. "They can't use their Windows monopoly unfairly, and the world will be watching," he said. "And we will as well."
Following is an edited transcript of the interview.
IDGNS: Customers seem to generally think this merger is a good idea. Why do you think that Wall Street has had such a hard time getting its head around it?
Thompson: Wall Street tends to view the opportunity through the rear-view mirror, not through the front windshield. They tend to follow trends that have already been established, not look for new market opportunities. If we were trying to consolidate within our segment, they would feel okay about that. If we were doing a small transaction that was not particularly relevant in changing the nature of the business, they'd feel okay about that. But this is a significant transaction. It is about future growth opportunities, not in the short term, but in the long term.
IDGNS: I think part of the problem may be that people are wondering what the combined company is going to be. Are you going to abandon the consumer business to focus on the enterprise?
Thompson: We're not going to abandon anything.
IT spending occurs in this fashion: one quarter to one third of all IT spending on software in the world is done by consumers and small businesses. The balance is done by large enterprise customers. Companies that have had their business model totally oriented to one buyer segment have been ravaged over the last four or five years. There are any number of companies up and down [Silicon Valley's main highway] 101 that you can point to that have been so focused on a buyer segment, that when that buyer segment stopped buying, all of a sudden their financial prospects went in the tank.
I believe the prototype for the successful software company in the future will be one that is very balanced by the buyer segment in the marketplace.
And so this company will derive about 25 percent of its revenues from the consumer markets; it will derive a very large portion of its revenues from the large enterprise market, and it will have a very strong middle market presence with the channel capability that Symantec and Veritas bring to the table. There's no software company, perhaps other than Microsoft, that has that diversity of customers to be able to deal with the economic ebbs and flows that will occur inevitably around the world.
So the way in which people have historically defined software companies, I think, is wrong. And we're going to prove that to be the case.
IDGNS: You have said that you couldn't care less about what Microsoft does.
Thompson: I don't
IDGNS: But Microsoft has been so successful at using its operating system monopoly to enter into new markets. How can you not be concerned about Microsoft entering the consumer security market?
Thompson: First off, Microsoft has to deliver a product that consumers want. So let's start with that fundamental premise: Do they have products that compete? So far, they haven't delivered anything that competes. Second, not only does it have to be important and meaningful to the consumer, it has to be important and meaningful to the distribution partner. And today our distribution partners do a terrific job with us, and they make an enormous amount of money supporting our products in the marketplace. And so they're not going to just say: "I don't want to do Symantec's products anymore because Microsoft's got free stuff that I'd rather give my customers and not make any money on."
And so the economic model isn't the same. And then, third, Microsoft can't, by consent decree, shut down the opportunity for us. They can't use their Windows monopoly unfairly, and the world will be watching. And we will as well.
IDGNS: How much more consolidation will the software industry see over the next few years?
Thompson: Well, the Oracle of Silicon Valley was the one doing all the forecasting about how many companies there are going to be. I don't consider myself an Oracle. I'm just a simple sales guy trying to run a business here. But we do believe that industry consolidation will occur. There are too many software companies for customers to choose from. The complexity of the buying process, the complexity of integrating the products, the complexity of getting them installed and interoperating well together is just getting too vexing for customers.
And hence the path to success is not going to be the IPO (initial public offering) path for many small or early stage software companies. It's going to be becoming a part of a bigger entity, where the dream that the engineers had can be realized through association with a larger company with sales, marketing and distribution capabilities that will help them take their product to the marketplace.
We've believed that for a long, long time. I've been at Symantec now six years. We've probably done 25 or more transactions over the course of the last six years, and we'll continue to do that as we round out our portfolio to serve the needs of customers as their needs continue to change.
Whether or not there will be 5,000 software companies five years from now or 500 software companies five years from now isn't particularly relevant to us. What we do know is we'll be one of them.