Symantec CEO ouster doesn't surprise industry analysts

Analysts say new Symantec CEO Steve Bennett must foster innovation, better leverage its assets and meet Wall Street expectations.

According to information security industry analysts, Symantec Corp.'s sudden CEO shake-up isn't all that surprising, given the security software giant's lackluster performance and inability to meet Wall Street's expectations.

You would be hard pressed to find anyone that still views Symantec as an innovator in the security market, and to fix that will take more systemic change than swapping CEOs.

Andrew Braunberg,
independent analyst

At the company's analyst meeting last year, analysts were critical of former Symantec CEO Enrique Salem's work, said Chenxi Wang, vice president and principal analyst at Cambridge, Mass.-based Forrester Research Inc. Symantec hadn't demonstrated innovation in its product portfolio, she said, and Salem's reorganization of business units under different umbrellas didn't appear to have much effect.

"If he doesn't pull out some magic tricks to get the stock price moving, his days at Symantec are numbered," Wang said, recalling the conversation analysts had among themselves during the event.

Wang happened to be at Symantec's Mountain View, Calif.-based headquarters Tuesday, meeting with a Symantec executive. She said she gathered the company had had an eventful board meeting that day, based on her conversation with the executive.

Wang said she wasn't surprised today when Symantec announced it had named Chairman Steve Bennett as president and CEO, replacing Salem.

Bennett, who joined Symantec's board of directors in 2010 and became chairman last year, previously was president and CEO at software maker Intuit Inc. from 2000 to 2007. He also spent 23 years at General Electric. He will continue to serve as chairman of Symantec's board.

His No. 1 task will be squeezing more revenue out of Big Yellow, but Bennett has demonstrated an ability to do it in the past. As chief executive of Intuit, the company's revenue grew to $2.7 billion in 2007, up from less than $1 billion in 2000 when Bennett took the helm.

"My view," said Bennett in a statement, "is that Symantec's assets are strong and yet the company is underperforming against the opportunity."

In its first-quarter earnings report Wednesday, Symantec said it expects its second-quarter revenue to drop 1% to 3% year-over-year. Inconsistent revenue performance during Salem's tenure ultimately led to the change in leadership, according to Allan Krans, senior analyst at Hampton, N.H.-based Technology Business Research Inc.

Salem spent 19 years at Symantec, and served as CEO for the last three. He replaced John Thompson, who retired in 2009.

"The board's decision to make a leadership change was not based on any particular event or impropriety, but was instead made after ongoing consideration and a deliberative process," Dan Schulman, Symantec's new lead director, said in a statement.

Amy DeCarlo, principal analyst at Washington D.C.-based consultancy Current Analysis, said the leadership change wasn't surprising given Symantec's financial performance and how companies usually start at the top when they want change.

"Their financial results tended to be fairly flat in a market where there is a lot of demand for security and storage technology," DeCarlo said.

Symantec wasn't fully leveraging its assets, DeCarlo added, which led to missed market opportunities. "Symantec wasn't ahead of the game in having a good solid cloud strategy," she said. "They had an opportunity to be a leader there, not just on security, but [on the] storage side, and they were slow to capitalize on it."

The vendor only recently started to pull together its strategy on cloud security, DeCarlo said, namely using the cloud as a delivery engine for security services, and that latency provided an opportunity for competitors.

Wang said Symantec was late to the game in catching up to the consumerization of IT trend. "When you look at what's going on in the market, its consumerization and mobile," she said. In March, the company bought mobile device management (MDM) vendor Odyssey Software and Nukona, a supplier of mobile application management.

Andrew Braunberg, an independent analyst and consultant, said in an email that Symantec never recovered from its controversial 2005 acquisition of storage giant Veritas.

"All these years later the market has still not caught up to the business logic of that deal and the merging of those corporate cultures drove a lot of good talent out of Symantec," Braunberg said. "I think the profitability numbers were a convenient reason to get rid of Salem, but Symantec's problems run deeper than him.

"You would be hard pressed to find anyone that still views Symantec as an innovator in the security market," Braunberg added, "and to fix that will take more systemic change than swapping CEOs."

In a Forbes blog post, Richard Stiennon, IT security analyst and founder of Birmingham, Mich.-based industry analyst firm IT-Harvest, said Bennett should immediately prepare to sell or spin off the Veritas business and pursue an aggressive strategy of acquiring fast-growing security technology companies.

"The antivirus industry is alive and well. There are almost 100 vendors in the space, many of them thriving with over $100 million in revenue. The only reason that Symantec has for losing market share is the failure to recognize the opportunity in the space," he wrote.

Scott Crawford, managing research director at Enterprise Management Associates, an industry analyst firm based in Boulder, Colo., said via email that today's threats and security demands present a major challenge for companies like Symantec.

"Many of the leaders in security are built on products at risk of obsolescence. Blacklist-oriented defenses such as traditional antivirus are challenged by the sheer volume and variety of threats," he wrote. "Today's mobile devices are predicated on a significantly different security model from legacy PCs. The security demands of cloud computing are still evolving. Security leaders are challenged as never before to respond to these changes. This is not something most of them can turn around in a few years, given their dependence on big installed bases still largely centered on this legacy."

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