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Symantec Charts New Course

 


By Hal Plotkin
CNBC.com Silicon Valley Correspondent

Dec 19, 2000 11:20 AM

Symantec Corp. {SYMC}, long known for its market-leading Norton Anti-Virus brand, is in the process of getting a big makeover.

The Cupertino, Calif.-based Internet security firm recently announced a dramatic change in its approach to its core anti-virus and intruder-detection market. The still-unfolding transformation is designed to open up a new front in the firm’s battle with arch rival Network Associates Inc.’s {NETA} spinoff, McAfee.com Inc. {MCAF}, which has been winning raves recently for its easy-to-use, Web-based anti-virus and PC maintenance product offerings.

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Symantec officials say the company’s new strategy will help it execute on its plan to build the enterprise side of its online-security business, which serves corporate customers and online-service providers, in addition to extending its leadership in the consumer anti-virus segment that its Norton brand dominated for more than a decade.

On Monday, Symantec’s shareholders approved the company’s merger with AXENT Technologies Inc. {AXNT} in a deal that gave AXENT shareholders one share of Symantec stock for every two shares of AXENT held prior to the merger. The newly combined companies plan to offer online-security products that include AXENT’s popular line of intruder-detection software in addition to Symantec’s anti-virus products and services.

Symantec’s stock has come under considerable pressure in recent months.


Symantec 52-week stock performance

In addition to the technology sector’s familiar valuation woes and increased online competition in the anti-virus space, Symantec is also fighting the growing perception among analysts that no single company can possibly provide a fully competitive and impenetrable set of soup-to-nuts online-security solutions.

Instead, some analysts have recently been saying that so-called best-of-breed players, which specialize in only one area of online security, will have the advantage moving forward over companies such as Symantec, which are attempting to put together a fuller, more-comprehensive suite of online-security offerings.

CNBC.com recently sat down with Stephen Trilling, Symantec’s director of research, and Steve Cullen, senior vice president of Symantec’s consumer-products division, to discuss the challenges the company faces.

CNBC.COM: McAfee.com seems to be winning raves for its online-security portal, which allows customers to easily download and update anti-virus protection over the Web. In what ways does Symantec’s new marketing approach differ?

TRILLING: We’ve created an entirely new division, the service provider solutions division, that is entirely focused on the Internet market. Rather than ask customers on the consumer side to go through our own portal the way McAfee.com does, we’re going to be licensing our anti-virus software to basically anyone who offers a service over the Internet. That way sites can offer the protection to their users and users can find the protection they need while they visit the sites they already like. We think it’s a better way to reach consumers.

CNBC.COM: This is a dramatic change in the way your products were previously marketed, such as direct sales from your site over the Internet or sales of your shrink-wrapped Norton anti-virus products at brick-and-mortar retailers. Do you plan to abandon those approaches?

TRILLING: No. What we plan to do, basically, is to compete with ourselves before someone else does it to us. We’re already dominant in the consumer area. If this plays out it, we think it will fill a lot of touch points for the consumer. We don’t want to let anyone take our customers, and this [sales] channel — the Web channel — has the potential to be very disruptive. We’d rather it be us disrupting our existing channels with a better approach than leave that to someone else.

CNBC.COM: What does this mean for Symantec’s familiar Norton anti-virus brand?

CULLEN: We’re still figuring out how the Norton brand will live with the Symantec brand. The consumer side where Norton is focused is growing about 10% this year and represents about half our business. But we expect the enterprise side of our business will grow by about 30% this year. Over the next 12 months the enterprise side should be about 60% to 65% of our business. So what you’ll be seeing is a whole new emphasis on the Symantec brand. That reflects the fact that Symantec is a very different company than we were two years ago, with the AXENT merger being the first big step in stitching together the right pieces to prove to customers and shareholders that we have a strategy in place that addresses the needs of the areas we’ve targeted for future growth.

CNBC.COM: Analysts have been expressing more than a little skepticism that corporate customers will turn to any one solution provider for online security, given the very complicated nature of the many potential threats such as intrusion, password theft, viruses, data encryption and so on. How will Symantec convince corporate customers they should go with a single vendor?

CULLEN: What you’re seeing is the maturation of the category in real time. Some of our competitors did have a heck of a time putting all the pieces together. The failures that have come before us certainly have built some walls that we’ll need to tear down. Customers tell us they really would like to get all these solutions from one vendor. They just don’t believe there is any one vendor who can put it all together for them. That’s why we’re working with a variety of approaches, direct and with the [system integrators] who can recommend our products. We’re going to offer content security, firewall, intrusion detection, virus protection and URL filtering [which stops Web surfers from visiting certain pre-identified sites]. But it is still evolving. We’re maybe at the 60% maturation point of the industry, so we have a ways to go.

CNBC.COM: What role will Symantec’s new distributed marketing approach play in helping you to further penetrate the corporate market?

CULLEN: It does two things. First, we already offer virus protection to Web portals, such as Yahoo! {YHOO}, so that users of Yahoo! mail don’t have to worry about viruses. They get that protection automatically, and we anticipate more arrangements like that. Once we’re serving a portal in that way it becomes easier to extend what we are doing into other areas, including offering similar protection to any of their customers that will work on any sites they visit or on any e-mail messages they receive. Second, we’re turning our service provider customers into partners, so they can offer virus protection to their users. We believe everyone has a responsibility to keep the Internet safe and secure, and we now have in place a strategy that will allow us to do that more effectively.

CNBC.COM: You say you hope to make virus protection a point of differentiation for online-service providers. But do you think customers will choose one site over another, simply because it offers access to virus protection software and updates?

TRILLING: It will give consumers one less thing to think about. We think the simplest, easiest-to-use solutions will prove best in the long run. There’s already too much complexity on the Internet. This is an effort to simplify things, and we think that’s exactly what consumers and service providers want. As I say, in a way we will be competing with ourselves, with our existing channels. But we think the best way to prepare for the future is to make it easy for consumers. Charles Schwab {SCH} wasn’t afraid to offer cheap online trading, even though it threatened their earlier approach. It’s a way to corner the market, attract new customers and hold on to existing customers, and we think we can do the same thing here.

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