Symantec sells enterprise security business to Broadcom in $10.7bn cash deal

Symantec knocks out enterprise security assets to Broadcom a month after rejected an outright takeover

Symantec has agreed a $10.7 billion deal to offload its enterprise security assets to chip-maker-turned-software-vendor Broadcom - just one month after rejecting an outright takeover bid.

"This transaction represents the next logical step in our strategy following our acquisitions of Brocade and CA Technologies," claimed Broadcom CEO Hock Tan. It is heading for revenues of $22.5 billion in fiscal 2019, but added that the deal would add $2 billion in revenues to the company's turnover when the deal is finalised.

However, staff with Symantec's enterprise security businesses won't be thrilled to read Broadcom's investor presentation, which makes clear that the organisation's "cost structure" will be "right-sized". It will also be refocused on endpoint security, web security and data loss prevention, which Broadcom believes offer a higher return on investment.

Large-scale redundancies also followed-on from Broadcom's acquisition of CA Technologies last year.

Rick Hill, Symantec's interim CEO, described the deal as "transformative", while chairman Daniel Schulman added that "by unlocking value from Enterprise Security, we are significantly advancing our ongoing transformation strategy and positioning our consumer cyber safety business, Norton LifeLock, for success".

Symantec will issue a special dividend of $12 per share to stockholders and increase its share repurchasing scheme, but will maintain existing levels of debt. All the $8.2 billion post-tax proceeds of the acquisition will go to shareholders.

The company claimed that, unencumbered by a somewhat moribund enterprise security business, Symantec's consumer security will be freed to grow more strongly. Hill pointed out that the Norton LifeLock products accounted for 90 per cent of Symantec's operating income in the first quarter of fiscal 2020.

"We expect this asset divestiture will enable our Norton LifeLock business to grow revenue in the mid-single digits, with continued strong cash flow from operations and expanded earnings growth," claimed Hill.

News of the deal came just a day after Reuters claimed that the two companies were in advanced talks, this time not over an outright acquisition, but only Symantec's enterprise security assets.

For Broadcom, the acquisition first of CA Technologies in a $18.9 billion deal last year, followed up by its interest in Symantec, indicates a sharp change in business strategy after its $145 billion bid for Qualcomm was blocked by the US Department of Commerce on US national security grounds.

Symantec, meanwhile, has struggled for revenue growth in an otherwise robust market. In May, Symantec CEO Greg Clark resigned from the company when it missed its fourth-quarter 2019 revenue estimates.

Furthermore, it is the second time in five years that Symantec has been split-up. In August 2015, it sold-off its data storage software business Veritas to private equity firm Carlyle Group, a move that led to 2,000 redundancies in the months leading up to the deal.