Symantec (SYMC), a $15 billion security and storage company, has decided to split itself into two distinct companies. The move, which follows similar decisions by two other tech behemoths, Hewlett-Packard (HPQ) and eBay (EBAY), aims to create value for shareholders.
Unfortunately Wall Street isn’t sure how much value the SYMC stock breakup will provide — shares are down more than 3% today.
The Logic Behind the SYMC Split
Silicon Valley has embraced the philosophy of the spinoff in the past few weeks alone. Ebay announced its decision to spin off PayPal at the end of September, in a move designed to unlock the growth potential of the online payment service. Unfortunately, however, investors aren’t convinced that EBAY stock will be worth a look in the post-PayPal era.
Hewlett-Packard also just decided to divide itself into two companies: One will focus on PCs and printers, the other enterprise and services. Whether the split will be a net long-term positive for HPQ stock remains to be seen, but the growing enterprise and services business probably shouldn’t be bogged down by the lagging PC business.
The philosophy behind the SYMC stock breakup is similar, and actually a result of the weakness in the PC industry as well. The Symantec divide will split its security and storage divisions from one another, as declining PC sales in the age of mobile are causing demand for its Norton antivirus software to lag.
While SYMC’s idea to separate the two disparate storage and security segments is sound, it may simply be too little too late. InvestorPlace‘s own Tom Taulli argues that Symantec is already behind the curve, and younger, leaner companies like Palo Alto Networks (PANW), FireEye (FEYE), have swooped in opportunistically as Symantec regroups and reorganizes.
Taulli elaborates on why the SYMC split might not make a difference:
“It will take about a year to pull off the split itself, not to mention the time necessary to transition to individual companies. And while the end goal would be increased focus, the process itself likely will serve as a continued distraction, giving competitors more time to make inroads.”
Hmm … sounds pretty inefficient for a move designed to “unlock value.” But wait, it gets worse:
“Then there’s the issue of boardroom drama. CEO Steve Bennett was let go back in March, but interim CEO Michael Brown didn’t take the full-time reins until just two weeks ago. And should we actually get a Symantec split, the search will be on for yet another chief executive.”
In theory, the HPQ, EBAY, and SYMC stock breakups all sound astute. We don’t know how they’ll play out in practice, but it certainly seems like Symantec will be facing an uphill battle.
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As of this writing John Divine held no positions in any of the stocks mentioned. You can follow him on Twitter at @divinebizkid.
