Why Symantec spending $4.6 bn cash to buy Blue Coat

Symantec HQ US
Cyber security company Symantec on Sunday announced its deal to acquire Blue Coat for approximately $4.651 billion in cash, indicating the growing importance of its small rival.

Symantec is spending almost eight times of the GAAP revenue of Blue Coat. Blue Coat had an operating loss of $252.47 million in its latest fiscal. Annual revenue of Blue Coat was just $598 million. Symantec posted annual revenue of $3,600.17 million.

Symantec is spending $4.651 billion in cash with the financial support of its private investors — Silver Lake and Bain Capital — to grab Blue Coat and its CEO Greg Clark, showing lack of faith in interim president Ajei Gopal.

Mountain View, California-based Symantec aims to finance the transaction with cash on the balance sheet and $2.8 billion of new debt.

Symantec will appoint Blue Coat chief executive officer Greg Clark as the CEO of Symantec after completing the acquisition. Symantec recently appointed Ajei Gopal as the interim president and COO.

Blue Coat is the #1 market share leader and share gainer in Web Security. Blue Coat delivers Cloud Generation Security to more than 15,000 customers worldwide.

The combined company would have had $4.4 billion in revenues in fiscal year 2016, of which 62 percent would come from enterprise security. Blue Coat posted revenue of $598 million (+17 percent) in its fiscal year ended April 30, 2016.

The acquisition of Blue Coat will enable Symantec to enhance its leadership position in the cyber security market.

Symantec will now have more software products for handling cyber threats across endpoint, email, web, network and servers. This transaction will combine Symantec’s threat telemetry with Blue Coat’s networks and cloud security offerings to provide differentiated security solutions across endpoints and servers, and email and web transactions.

Symantec will be able to deliver security for the cloud generation of users, data and apps, for the cloud, from the cloud and to the cloud. The company’s data loss prevention capabilities will be applied at the web proxy and to over 12,000 cloud applications.

Dan Schulman, chairman of Symantec, said: “Together, we will be best positioned to address the ever-evolving threat landscape, the massive changes introduced by the shift to mobile and cloud, and the challenges created by regulatory and privacy concerns,”

Annual net cost synergies will be $150 million. In addition, Symantec earlier announced $400 million in net cost savings. This transaction will allow Symantec to improve profitability while continuing to invest in innovation and drive growth.

By the end of fiscal 2018, Symantec expects to realize $550 million in run-rate cost savings including $400 million from Symantec’s previously announced cost efficiency program.