Symantec to expand cloud-based software

Symantec Corp is looking to expand offerings of cloud-based security and storage services in a bid to accelerate sluggish revenue growth, Chief Executive Enrique Salem said on Monday.
Salem, who took the helm of the world's largest maker of security and storage software in April, told the Reuters Global Technology Summit that he wants to boost sales from data backup and other services that Symantec delivers over the Internet, so that they account for 15 percent of revenue within three to five years.

Profit margins for Web-based software tend to be thinner than for traditional software because vendors have to foot the cost of running computer centers to host the programs, on top of the developments costs for the software.

But Salem said he believes Symantec will be able to generate margins from hosted storage that are "comparable" to selling traditional software within three to five years.

"The lifetime value of a customer will potentially be higher," the CEO said of such offerings, which are commonly known as Software as a Service, or SaaS.

The 17-year company veteran also said he is in no hurry to make acquisitions, even though Symantec has $2 billion in cash, as he expects valuations of private companies to decline over the next year. Symantec has bought 30 companies in the last decade.

"Private company expectations on valuation are still too high," Salem said. "We can afford to be patient."

Salem said the company will use acquisitions to add products in security, services delivered over the Internet, systems management and virtualization.

He pointed to recent purchases of Swap Drive and Message Labs, which sell online backup and messaging services, as examples of how he is using acquisitions to add such products.


Symantec's hosted storage services, which consumers and businesses access over the Web, are among its fastest-growing products. Salem said companies were originally hesitant to use the Internet to transmit sensitive information, but are gradually becoming more comfortable with the concept, thanks to improved technology for securing the data.

"We are no longer waiting for people to say they are interested. People are absolutely interested," he said. "It's crossed the chasm."

Symantec rival McAfee Inc last week announced plans to launch an online backup service for consumers in the second half of this year with data storage equipment maker EMC Corp, which will compete with the one that Symantec sells using technology it acquired from Swap Drive.

Salem said Symantec has some 7 million customers using its hosted storage services, about 90 percent of which are either consumers or companies with 1,000 or fewer employees.

Web-based storage and software services are projected to be among the fastest-growing segments of the sluggish tech sector of the next few years.

Gartner Inc expects 2009 sales of cloud-based software, storage and backup services to grow about 22 percent this year to a record $12 billion, even as the recession causes overall technology spending to decline.


Cupertino, California-based Symantec's revenue missed analysts' forecasts in its most recent quarter, as business security software sales fell 14 percent to $370 million.

Salem said on Monday he hopes sales to small and mid-sized businesses will improve over the next few quarters due to a new product launched earlier this month. He added that sales of security software to larger companies and Symantec's back-up software business are both doing "very well."

McAfee has gradually been expanding its distribution agreements with PC makers over the past 18 months, a strategy that analysts say has paid off in increased market share.

Salem said Symantec's coveted contract to distributes its Norton anti-virus software on Hewlett-Packard Co's consumer PC's will continue for at least another year. That contradicted a comment last week from McAfee Chief Executive Dave DeWalt, who told Reuters the agreement would expire within the next 12 months.

DeWalt had said he wants to win the HP deal away from Symantec and could do so within the next year.

"He is wrong," Salem said. "Maybe he should get his facts straight."

Officials with HP and McAfee could not be reached for comment.

Reporting by Jim Finkle and Alexei Oreskovic; Editing by Tiffany Wu, Lisa Von Ahn and Richard Chang

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