Separation woes for Veritas as Symantec cuts sale price

Symantec lops $1bn off Veritas sale price as the information management player sees its expected sales and profits tumble

"Uncertainties" and a "difficult environment" have meant Symantec has cut its sale price for Veritas, as the information management (IM) vendor reported a big fall in expected profits and sales following separation difficulties.

In August Symantec agreed a deal to sell Veritas for $8bn (£5.14bn) to investors The Carlyle Group, but now this price has been cut down to $7.4bn. The amount of offshore cash remaining in Veritas has also been doubled to $400m, "which will result in a net consideration to Symantec of $7bn".

"Symantec and Carlyle entered into the amended terms after uncertainties developed regarding the transaction," a company statement said. "Both Symantec and Carlyle believe that all key conditions to closing have been satisfied and intend to close the transaction on 29 January 2016."

Although the "uncertainties" were not named, Symantec also released an 8-K filing yesterday which said that it expects Veritas' sales and profits for the quarter ending 1 January to be down considerably year on year.

The reason behind these poor results was the transition Veritas underwent following its separation from Symantec, the statement said. With this separation, Veritas restructured its sales force but this "did not generate the intended results, and we believe they had a negative impact on our sales activities during the three month period ended 1 January 2016".

As well as this restructure, Veritas noted an upswing in competitive pressure, with rivals cutting prices, coupled with "a general reduction in demand".

Veritas also reported difficulties encountered with a new ERP system which meant that its sales force had to spend more time learning how to use it and less time selling. In connection with this new ERP system, the vendor noted a "higher than normal rate of rejections and cancellations of new and renewal orders". This was due to customers and partners inputting order data incorrectly.

All these factors meant for the three months to 1 January, Veritas expects its net revenue to be between $550m and $580m, compared to $668m in the same period last year. Meanwhile, it predicts its adjusted EBITDA to be between £140m and $170m, compared to $237m in the same period last year.

While it seems Veritas has struggled with its initial separation from the security vendor, Symantec also released an update on its financial results yesterday which said it expects its third quarter of 2016 to be "above the midpoint of the guidance".

Commenting on the reduction in the price for Veritas, Michael Brown, Symantec CEO, said: "In a difficult environment, we can move forward with a high degree of certainty around closing a transaction that represents attractive value for shareholders.

"In addition, this transaction will allow Symantec to further focus and accelerate its strategy as the world's leading cybersecurity company."