Security-Megadeal Letdown?

When Symantec announced plans to merge with Veritas late last year, it threw a wrinkle into the convergence trend. Until then, the bulk of impending security consolidation was thought to be between security companies or with networking vendors.

But while some thought the Symantec/Veritas deal would usher in more megamergers, so far security challengers have not responded in kind. What deals they have made have largely been done to expand existing product portfolios.

Part of the reason the Trend Micros, McAfees and RSA Securitys of the world haven't rushed to align themselves with an EDS, Cisco or Microsoft has to do with how Symantec's merger has been received on Wall Street; its stock price fell by about one-third in the six months after the deal was announced despite ongoing strong quarterly results.

After initial concern over the lack of apparent synergy between antivirus and storage software vendors, however, analysts have somewhat softened their stance. Since May, six securities firms have upgraded Symantec's stock; in June, Prudential issued a statement saying that while synergy challenges remain, the merger should present "significant commercial opportunities" for the company, namely, an ability to compete more favorably with Microsoft. But until Symantec shows tangible examples of the two technologies coming together--new integrated products aren't expected until well into 2006--its share price may continue to wallow.

That doesn't rule out any other potential megadeals, especially as other vendors decide how best to compete with Microsoft. But for now, most seem content establishing themselves as comprehensive, platform-agnostic security alternatives. However, one vendor to keep an eye on is Trend Micro. The company already has partnered with Cisco, and this spring, CEO Eva Chen told VARBusiness that her company could be acquired if it's in the best interests of shareholders.Meanwhile, security VARs can only continue doing business as usual. How a merger affects a reseller often depends on whether it is partnering with the buyer or the seller. The lesson, regardless? VARs who partner with likely acquisition targets must remain flexible in this volatile market.