But as the consequences of Symantec’s bad quarter show, a company in such a transition must be as resilient as it is flexible to recover from stumbles along the way. And recover Symantec did, taking its market capitalization from about $600 million to more than $6 billion within three years, even as the stock values of most software companies were plummeting.
Listen, Learn, Plan
Founded in 1982, Symantec was one of the earliest PC software companies, and a long-term survivor, even as once-brighter lights like the Lotus Development Corporation, Borland International, and WordPerfect dimmed or disappeared through acquisitions. Symantec produced a broad range of mostly acquired products, ranging from software development tools for programmers to ACT, the most popular contact management program. The 1990 acquisition of Peter Norton Computing Inc., maker of the leading antivirus product, Norton Utilities, cemented Symantec’s hold on the market for PC utilities, which are programs that help diagnose and fix disk-drive errors and perform other bits of computational housekeeping.
But by the end of the 1990s, Symantec’s sales and earnings were erratic; aggressive competition had eroded profit margins, and, after five work-force reductions in five years, morale was low. The company had largely missed the Internet boom. In the fiscal year ended March 31, 1999, Symantec shares were trading at about one times revenues, which then stood at $644 million. Other software companies were commanding five times revenues or more. That Symantec’s valuation was so low when Mr. Thompson joined the company was testimony to a company that had lost its way. “The situation was untenable,” says George Reyes, a Symantec board member and former vice president and treasurer of Sun Microsystems Inc. “It was either fix the company or continue to unravel and go into a death spiral.”
At that time, Symantec, with just more than 2,000 employees, had three business units: Remote Productivity Solutions, Security and Assistance, and Internet Tools. Remote Productivity encompassed fax software, the ACT contact manager software, and PC Anywhere, a software that allows users to connect multiple PCs. Security and Assistance products included Norton AntiVirus as well as programs for encrypting e-mails and keeping hard drives healthy. Internet Tools offered a set of software that developers could use to create interactive Internet sites and applications using the Java programming language.
Each of these business units had some market-leading products. However, the products had little in common besides a distribution channel, and even some of the popular programs were consistently unprofitable because of high development and support costs. Plus, customers did not closely identify the best-selling product, Norton AntiVirus, with the Symantec brand. In fact, the product still carried a prominent picture of Peter Norton, founder of the acquired company, on its box.
“Part of the problem was [Symantec] did too many things, and many of them not too well,” recalls Mr. McNamee. Mr. Thompson, who saw this problem immediately, pushed the company to focus on what it already did well, rapidly jettisoning weaker products, and even some strong ones, that fell outside his new strategy.
“The idea I had was I would just listen for 90 days, and within 100 days we would have a plan,” Mr. Thompson says. “But a couple of things became clear right away. The Internet Tools business had no linkage to anything else — we didn’t even use the product ourselves — and it was losing money. The company had no strategy for an Internet-based economy; there was no Web distribution, and there were no Web-based products.”
At an offsite meeting about 75 days into his tenure, Mr. Thompson brought together senior managers to determine the company’s new direction. The first decision was to concentrate on security, which was clearly the company’s strong suit. Another early decision was to restructure Symantec according to customer sets, rather than by products or geographies.