Over the past few years, Internet security has become increasingly competitive as the technology has shifted to an increasingly mobile world of gadgetry, breaking down walls between corporate and consumer technologies. One result: Security becomes an ever-larger concern. Although Symantec Corp. remains a global leader in security software -- it's best known for its Norton line of antivirus products -- its market share has slipped as rivals vie for bigger pieces of the business. Symantec's bigger competitors include Intel Corp.'s McAfee Inc., Microsoft Corp., AVG Technologies, Trend Micro Inc. and Kaspersky Labs Inc. But the industry is also facing incursions from software companies that offer their own Internet security packages, making competition tougher and more fragmented.
The Deal magazine's Suzanne Miller recently discussed some of these challenges with Angela Tucci, 45, who joined Symantec as chief strategy officer in January 2011 and directs the company's corporate strategy, M&A, corporate venture investing and strategic partnerships. Previously, Tucci, who received an undergraduate degree in physics at Princeton University and an M.B.A. from Stanford University, spent three years as chief strategy officer at Neon Enterprise Software, where she was responsible for the company's corporate strategy and market direction.
The Deal magazine: How would you say disruptive technologies influence your deal strategy?
Angela Tucci: Changes driven by computing inventions of the past -- the mainframe, client-server computing, the personal computer, even the Internet -- do not compare to what we're seeing today. The consumer with a smartphone or tablet is the defining image of this new era. The desire to have information available at anytime from anywhere is driving the rapid adoption of cloud services. In addition, the disruption of mobile to IT organizations is not just about the device, it's about a trend towards bringing your personal devices to work and accessing critical information. As disruptive trends like mobile or cloud impact our customers and partners, we attempt to get out in front of them via internal innovation and investment so that we can offer customers the best solution to meet their needs.
What are your challenges to stay ahead in the face of increasing market fragmentation and tougher competition?
As access to information changes, so does the way we protect it. There is no one-size-fits-all security solution. As threats evolve, our customers continue to look to Symantec to provide the breadth of services and solutions to protect their information -- whether it is in data centers, in the cloud, on a desktop or across a variety of managed and unmanaged mobile devices. As such, we continue to see strong demand for our security solutions. Also, fragmentation and consolidation in security is nothing new. As threats quickly evolve, so does the technology to thwart them. As the global security leader, Symantec will partner with or acquire niche technologies to pair with our organic developments and offer an integrated solution that minimizes the fragmentation issue.
Symantec has made three acquisitions so far this year. Are you going to remain in a buying mode?
I expect Symantec to remain acquisitive. Acquisitions that complement internal innovation are an important element of our strategy to drive growth and better serve customers with new capabilities. In 2012, we've already acquired three companies including LiveOffice Inc, a leader in cloud-based archiving whose technology allows us to offer our enterprise and [small and medium-sized business] customers their choice of on-premise or cloud-delivered solutions. In March, we acquired Odyssey Software Inc. to strengthen our mobile device management offerings and Nukona Inc., a provider of mobile application management, which enables our enterprise customers to securely facilitate the use of personal devices on the company network.
Tech companies have a history of overpaying. Is that still happening?
We have certainly seen some eye-opening transaction multiples in recent months, particularly in mobile and information intelligence -- Hewlett-Packard's $12 billion purchase of Autonomy and its $1.5 billion purchase of ArcSight, for example -- areas that are interesting to us. Given that the IPO market is opening a bit wider, I foresee continued upward pressure on multiples to get deals done. That said, premium pricing can create a challenge, as buyers need to be selective with their strategic moves, judicious about their uses of capital and focused on driving shareholder returns. When prices rise, it raises the bar for buyers to generate returns in reasonable time frames. However, it can also signal when there is a scarcity of available assets and capabilities to drive strategic change amidst tectonic industry shifts. We are arguably in one of the greatest technology platform shifts in history -- moving beyond the PC to a plethora of new interconnected devices.
Some critics say Symantec overpaid for VeriSign's security business and suggest the company has seen a gradual revenue decline in its authentication business as consumers turn to companies like Comodo and Go Daddy for less expensive SSL certificates. Symantec's five-year total return to shareholders has underperformed 6.8%.
Any underperformance in the excess TRS analysis is not a function of our VeriSign acquisition. In fact, VeriSign is accretive to earnings. We continue to see steady growth in trust services and double-digit growth in the user authentication business. The VeriSign acquisition is [net-present-value] positive, representing a gain to shareholder value, not a loss. It has exceeded financial expectations every quarter since it was acquired. In recent years, Symantec has refocused on driving consistent organic growth and normalizing for near-term volatility, reflected in our stock price -- and, by extension, TRS.
VeriSign was the biggest deal Symantec has done. How was the integration process different from others?
From an integration perspective, this acquisition was unique, in that we only bought part of a company, not the whole entity, so we had to manage around a number of added complexities. For example, after the completed acquisition, there was still a corporate, publicly traded VeriSign Inc. that we had no insight into or control over. With the VeriSign name being used by two different organizations, it had the potential to cause confusion in the marketplace. We also had to manage a number of transitional services agreements, from IT and data center support to website properties and real estate locations. The bulk of the integration was done in the first nine months; however, we still continue to integrate some elements. In addition, we continue to achieve our business results post-acquisition because our approach effectively balanced quickly integrating core functions into Symantec to obtain the benefits of the larger company while still having the business unit coordinate cross-functional activities. This approach is now used as a model for acquisition integrations within Symantec.
How big is your corporate development team, and do you have a separate integration group?
Within the organization, we have a corporate development team and a separate integration management office that work in close partnership. The corporate development and IMO teams are an agile and experienced team of approximately 10 people. In addition, we have 40 to 50 cross-functional M&A integration leads, with extensive additional resources under them, that can expand and contract as deal volume fluctuates.
How has your M&A playbook evolved?
We have a playbook that we review frequently and revise as needed. An example of how we have evolved the playbook is how we expanded it for individual and combined business models. We have incorporated traditional license software, [software as a service] and appliances all in a single acquisition model.
What are your group's metrics for gauging the success of a deal?
We've continued to evolve our approach to "value drivers" or metrics that we use to measure the success of each acquisition. Historically, we focused on typical financial and HR retention targets; however, over the past few years we have evolved our approach to look at multiple operational and strategic levers to drive deal value. Depending on the type of acquisition, we may look at metrics around increased sales, improved cost structure, improved balance sheet, enhanced capabilities and enhanced market reputation. We conduct an analysis and align the executive team on what the key value drivers are prior to signing a letter of intent.
We not only measure the deal against these value drivers quarterly for two years after close, we also conduct due diligence and integration through the lens of these predetermined value drivers. Our deal value drivers are critical for aligning the cross-functional team involved in the tactical integration and decision making for each announcement.