Symantec to Sell Veritas for $8 Billion to Focus on Security Software

Norton antivirus software maker Symantec has agreed to sell its data storage unit, Veritas, for $8 billion to a group led by Carlyle Group as it seeks cash to turn around its core security software business.

The deal, the biggest U.S. leveraged buyout this year, will give Symantec much-needed cash to compete better in the fast-growing cyber security market.

Symantec’s shares, however, fell as much as 5 percent on Tuesday as investors focused on the company’s weak earnings and forecast.

Symantec has been facing headwinds in its security software business as weak PC sales hurt demand for its products, which come bundled with computers.

“Now they really get a new lease on life in terms of focusing on their core security DNA as the Veritas storage piece has been a massive black cloud on the Symantec story for a decade,” FBR Capital Markets analyst Daniel Ives said on Tuesday.

Symantec, which bought Veritas for $13.5 billion in 2005, said it expected about $6.3 billion in net cash proceeds from the sale.

Revenue from Symantec’s consumer security business fell 19 percent in the first quarter, while revenue from its enterprise security business dropped 13 percent.

Revenue from Veritas, which accounts for nearly 40 percent of Symantec’s total revenue, fell 10 percent.

The company also forecast current-quarter profit and revenue below analysts’ expectations. Symantec forecast an adjusted profit of 40-43 cents per share and revenue of $1.49 billion-$1.53 billion for the second quarter.

Analysts on average were expecting earnings of 45 cents per share and revenue of $1.54 billion, according to Thomson Reuters I/B/E/S.

Symantec’s net income halved to $117 million, or 17 cents per share, in the quarter ended July 3.

Excluding items, the company earned 40 cents per share, below the average analyst estimate of 43 cents.

Revenue fell 13.6 percent to $1.5 billion, missing analysts’ expectations of $1.53 billion.

Symantec also raised its buyback program by $1.5 billion to $2.6 billion.

The company said the Veritas sale is expected to close by Jan. 1. The buyer group includes Singapore’s sovereign wealth fund GIC.

Symantec shares were down 4.5 percent at $21.88 in midday trading. Up to Monday’s close, the stock had fallen about 7 percent in the past 12 months.

(Reporting by Abhirup Roy and Lehar Maan; Editing by Kirti Pandey)

This article originally appeared on Recode.net.

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