Software firm Symantec (SYMC) reportedly could join the ranks of the technology divorce pile.
According to Bloomberg report, Symantec is considering a split that would create one company focused on storage, and another on security.
The move comes at a time when the tech industry has suddenly become enraptured with corporate breakups to unlock value. In the past couple of weeks, eBay (EBAY) and Hewlett-Packard (HPQ) have announced splits that resulted in nice spikes in their share prices.
But Wall Street doesn’t seem all that impressed with Symantec’s plan, as SYMC stock is up just more than a percent in Wednesday’s afternoon trading.
So why the lack of spinoff love?
For one, Symantec was already up nearly 15% in the past six months, so it’s possible investors were already bidding up SYMC in anticipation of an eventual breakup. The split would have some real benefits — there is little synergy between the security and storage businesses, and it’s possible the combination has distracted the company from being competitive. Meanwhile, early-stage companies such as Alto Networks (PANW), FireEye (FEYE) and Box have been able to grab more and more market share.
That has weighed on the longer-term performance of SYMC stock. After the mega-merger of Symantec and Veritas about a decade ago, shares have actually lost some 15%.
But the Symantec split could be a classic case of too little too late.
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.
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 light of all this uncertainty, it will not be easy to deal with some of the core issues facing the company. For example, a big chunk of SYMC’s security revenues come from virus detection software. Yet the market for PCs is fairly stagnant and there are also many low-cost or even free software/cloud alternatives. Unfortunately, Symantec has been slow to move into faster-growing areas of security, such as with mobile devices, real-time server protection and so on.
The storage industry also is under tremendous pressure. Players like Google (GOOG) and Microsoft (MSFT) are offering dirt-cheap plans, which have put pressure on SYMC’s margins.
Bottom line: A Symantec split could result in a pair of weak companies and two newer CEOs. That’s not a good recipe for at least near-term success, so it’s likely that SYMC (and the spinoff company) will lag for some time.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
