Symantec investors give OK to Veritas deal

Symantec, which has seen its market value drop by roughly a third since the deal became public last December, received roughly 95 percent of votes in support of the acquisition at a shareholder meeting here. Veritas shareholders also gave a green light to the merger on Friday.

"We're like a dog that's chasing a car," Thompson joked after Symantec's shareholder meeting. "Now that we've caught it, people ask, 'What do you do with it?'"

In recent months, Thompson has been hitting the road to talk to investors about his vision of the merger of the security giant with storage titan Veritas, initially valued at $13.5 billion. Investors, however, were skeptical the fast-growing security company could maintain the premium its stock was trading at, compared with its earnings, if it merged with Veritas, which operates in a slower-growth industry.

But over the past six weeks, investors have begun to turn the corner, Thompson noted.

"They've been asking questions about the integration plans and the progress on that?There hasn't been a lot of questions on the strategy (of the merger)," Thompson said.

One individual investor from Burlingame, Calif., who attended the meeting said he voted for the merger.

"If they can make it work and make money from it, I'm happy," said Grady Hicks, a four-year Symantec investor.

A number of institutional investors snapped up shares after the deal was announced seven months ago.

"I voted for the transaction. I believe in John Thompson's vision to create the largest software security company in the world. Now it's up to them to execute and deliver on the plans they laid out," John Paulson, whose hedge fund Paulson & Co. owns more than 21 million shares of Symantec, said in an interview Thursday.

The merger is expected to close July 2.

"The bulk of the heavy lifting will be done in the first six months," Thompson predicted, referring to the integration of the businesses. "In the 12 to 18 months beyond that, we'll be fine-tuning and better aligning the companies."

He noted that 80 to 100 people have been working on the integration since early January, and he said the plans are "solid."

Symantec director William Coleman, co-founder and former CEO at BEA Systems, said he does not think investors have yet come to the understanding of the strategic value of the merger, given that the stock is still trading at a steep discount to its previous level.

But he noted investors will fully understand the value of the merger once there is "positive execution" of the plans.

Coleman pointed to other deals that were not initially understood by companies' investors, such as the $20 billion deal in which Veritas acquired Seagate Technology's assets. On the day the complex deal was announced, which also involved an investment group buying part of Seagate, Veritas shares fell nearly 10 percent and continued to slide steeply. In a two-month period, Veritas shares fell roughly 50 percent.

"Mark Leslie (former Veritas CEO and chairman) told me the shares declined because of investor skepticism?but he was building the company for the long term and not to serve the traders," Coleman said. "You have to look at the long-term value for the company, and I think (Thompson) has done just that."

Symantec now must show investors that it can build that long-term value for the company.

"John Thompson has staked out a very bold move, and if it's the right bold strategic move and their financial results bear that out, the stock price will come back," said Kevin Sidders, a managing director at Credit Suisse First Boston.

The marriage of a security company and a storage company is a move that tells both industries that systems management and security should be managed as one, Sidders said, noting that if the Symantec-Veritas merger is successful, it may lead to other similar deals.

"It's so forward-thinking and so bold, I would say in two years you will be able to evaluate if this was the right move strategically and financially," Sidders added. "This is longer than most deals. With most deals, you want to be able to evaluate them within the first year."