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Published: February 14, 2003

 
 

Symantec’s Strategy-Based Transformation

“There were suggestions that we change the name of the company to Norton, but Norton is very heavily associated with $29.95 products,” says Mr. Frischmann, Symantec’s senior vice president of communications and brand management, a 30-year IBM employee who was Mr. Thompson’s first executive hire. “We’ve accomplished a lot by associating Symantec with the enterprise. We’ve made a few steps toward moving Symantec into the consumer market, but we’re moving slowly. I believe we can have one brand, but it could take five years or more,” he says.

Five years in the software industry is a very long time. Although the Norton products don’t command the six- and seven-figure price tags of the enterprise offerings, or the healthy profit margins, they do generate a tremendous amount of cash flow, and Symantec is not going to make the branding change until they know their position in the consumer space is secure. Despite the focus on the enterprise, the consumer business is still growing at a faster rate. In the quarter ended September 30, 2002, Symantec’s worldwide enterprise security business grew 30 percent from the same quarter the previous year and was 44 percent of total revenue, while the consumer business grew by 68 percent during the same period and was 38 percent of total revenue.

Analysts differ on whether the continued importance of the consumer business is a problem for Symantec. Whereas some view it as a weight slowing the enterprise initiative, others see it as fueling the whole company’s growth.

“While the enterprise opportunity is the bigger one over the long term, the consumer market is still under-penetrated, and nobody can compete with Symantec, given the company’s 70 percent share of the market today and their strong brand with Norton,” says Jonathan Ruykhaver, an analyst with Raymond James. “The strength of the consumer business has allowed Symantec to be acquisitive, to buy some strong emerging technologies. It gives them the opportunity to educate the enterprise market and capture that opportunity over time.”

Others say Symantec should move away from consumer products, which sell at very low prices, but still require a high level of technical support. “All they have in that space are products that are painfully hard to support at the prices they’re getting through retail,” says Jeff Tarter, editor and publisher of Softletter, an industry newsletter based in Watertown, Mass. “They get that $15, but they have to be constantly finding viruses, fixing them, making the product better than McAfee. If they had any sense, they’d get out of the consumer business, but they can’t.”

Mr. Thompson says this view is simply wrong. “There’s no question the consumer business is growing faster at this moment, but at a time when the enterprise software business around the world is contracting, ours has grown 30 percent,” he says.

Of course, 34 percent revenue growth and 43 percent earnings growth are problems most software companies would love to have right now. Mr. Thompson says he is not concerned about the pace of change or the big players Symantec will increasingly face as his strategy proceeds.

“Companies that win in this industry are willing to make big bets, and they’re able to get their team rallied behind what they’re trying to do,” Mr. Thompson says. “The fact that somebody bigger than you has an idea doesn’t mean you should run away from it. I can outrun. I can outthink. I can outexecute. If you can do these things, size doesn’t matter.”

Reprint No. 03108


Authors
Lawrence M. Fisher, lafish3@attbi.com, covered technology for the New York Times for 15 years and has written for dozens of other publications. Mr. Fisher, who is based in San Francisco, is a recipient of the Hearst Award for investigative journalism.
 
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Resources

  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.
  3. Bruce A. Pasternack and James O’Toole, “Yellow-Light Leadership: How the World’s Best Companies Manage Uncertainty,” s+b, Second Quarter 2002; Click here.
  4. Benson P. Shapiro, Adrian J. Slywotzky, and Richard S. Tedlow, “How to Stop Bad Things from Happening to Good Companies,” s+b, First Quarter 1997; Click here.
  5. John P. Kotter, The Heart of Change: Real-Life Stories of How People Change Their Organizations (Harvard Business School Press, 2002)