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 / Spring 2003 / Issue 30(originally published by Booz & Company)


Symantec’s Strategy-Based Transformation

“We did get the benefit of what I’ve called the most insidious, malicious code environment in the history of the security industry over the last two years,” Mr. Thompson says. “No one could have ever forecast the level of activity by hackers and virus writers that we’ve seen. And we’ve just been reasonably well positioned to be able to take advantage of that when it did occur.”

Sales growth in the September 2002 quarter was 7 percent, jumping to 20 percent in the December 2002 quarter. For fiscal year 2002, which ended on March 31, Symantec’s sales grew 14 percent, to $1.071 billion, with earnings of $65.1 million, or 41 cents a share.

This strong performance has continued. For the fiscal second quarter 2003, ended September 30, 2002, Symantec posted revenues of $325 million, a 34 percent increase over the year-earlier quarter. Pro forma net income before one-time charges and the amortization of acquisition-related intangible assets was $60 million, or 38 cents a share, compared with $42 million, or 28 cents a share, for the same quarter a year earlier.

A Suite of Challenges
Still, challenges remain. Old competitors, like Network Associates, Trend Micro Inc., and McAfee, are rapidly following Symantec’s move to the enterprise market. Established enterprise players, such as Computer Associates, Checkpoint Systems Inc., and Cisco, are ceding little ground. Firewalls are a natural product for a network systems vendor such as Cisco, which can build them into its servers at very little additional cost, and Computer Associates can easily add security processes to its systems management software, in much the same way Microsoft has slipped features from Norton Utilities into Windows over the years.

Symantec has continued to buy companies, rolling the acquired technologies into its security portfolio. This strategy presents two challenges. The first is the cultural challenge created by any acquisition; the second the technical difficulty of integrating products created by disparate development teams.

On cultural matters, Symantec treads a middle line between the laissez-faire approach historically used by Novell Inc., which allowed acquired companies to retain much of their own cultures and many of their own processes, and the strict discipline of Cisco, which erases the old company’s identity and plants the Cisco flag the day the deal closes. Symantec’s flexible approach is visible in small ways, like the shorts and flip-flops favored by employees at the former Santa Monica home to Peter Norton, which contrast with the khaki culture of the Silicon Valley headquarters.

“We have a pretty aggressive integration process, but we’re not at the point where we say you have to think the Symantec way,” says Robert Clyde, Symantec’s vice president and chief technology officer, who joined with the Axent acquisition. “We show up the next day with the benefit packages, with as many answers as we can, because it’s uncertainty that causes the most pain.”

With respect to the other challenge, integrating products created by disparate development teams, Mr. Clyde says the technical integration of the acquired products has been simplified by something called the Symantec Enterprise Security Architecture. “Rather than every product integrating with every other, with each acquisition, we move products onto that common architecture,” he says. “It’s phased, so there’s some easy integration that happens right away, and the more difficult stuff takes longer. This way we can integrate acquired products quickly.”

The pace of migration away from the Norton brand is another issue for Symantec. The company’s leadership would like the entire product line branded with the Symantec name, and the enterprise offerings all are, as in Symantec Enterprise Firewall 7.0, Symantec Enterprise Security Manager 5.5, and so on. But the consumer products all still carry the Norton name; their yellow color, which Peter Norton adopted so his boxes would stand out on store shelves, is now Symantec’s official hue. The Symantec name is gradually getting bigger on the boxes, and Mr. Norton’s face is gone, but even many enterprise customers still know the company primarily as the publisher of Norton products.

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  1. Ray Lane, “The Future of Enterprise Software,” s+b enews, 07/16/01; Click here.
  2. Jay Marshall and Daryl R. Conner, “Another Reason Why Companies Resist Change,” s+b, First Quarter 1996; Click here.
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