Whitworth’s Relational sets sights on Symantec

By Nadia Damouni

NEW YORK (BestGrowthStock) – The investor who fought his way onto the board of drugmaker Genzyme Corp (GENZ.O: ) has been buying shares of Symantec Corp (SYMC.O: ) in a possible bid to break up the software company, said people familiar with its strategy.

Among the changes that Relational will consider include pushing the software company to split its two core businesses — storage and security — said one source.

The plan would involve spinning off the Veritas storage division, which would open the company to more potential buyers who have otherwise shied away from buying Symantec, said the person.

A Relational spokesman and a Symantec spokeswoman declined to comment.

The San Diego-based activist investment fund, co-founded by Ralph Whitworth, began accumulating a position over the summer. As of June 30, Relational reported ownership of 5.7 million shares, or 0.72 percent, in Symantec.

“There are new activist shareholders that are taking a bigger stake,” that person said. Bankers have approached numerous activist investors, pitching ideas that could push them to confront the company’s management, said the people.

By November 15, when shareholders are expected to report their holdings, the composition of the list of shareholders owning between 1 to 5 percent is likely to change, said another person.

Names that have been mentioned include Jana Partners and billionaire activist shareholder Carl Icahn, both of whom previously owned stakes in Symantec, the people said.

At least one investor will likely disclose a stake in a 13-D filing, which typically precedes a request for a change in management or strategy, as soon as the end of the year, these people said.

Relational has a record of buying into companies to press for change, said a person close to the situation.

In 2010, Whitworth joined the board of Genzyme after initially buying shares in the Cambridge, Massachusetts-based biotech company in 2008. Genzyme has since announced a review of its options, which drew a hostile takeover approach by Sanofi-Aventis SA (SASY.PA: ).

CHALLENGES

Recent deals in the software markets, including Intel’s (INTC.O: ) $7.7 billion deal for McAfee and Hewlett-Packard’s (HPQ.N: ) $2.35 billion purchase of 3Par, have turned the spotlight on Symantec.

But several shareholders pushing for a breakup of Symantec said it will take time to develop because of the company’s complicated structure.

A split-up could be challenging because the units have been tightly integrated over the years, most notably its sales forces, said a third person familiar with the situation.

“Splitting up, you have to go back through this whole process, which is very painful,” that person said.

There are also concerns over the tax associated with the spinoff, as well as “human social issues,” integration, disruption and revenue losses, said the person.

Symantec’s acquisition of Veritas in 2005 moved the security software company into the storage software business. But investors have criticized the strategy for many years, most recently during the company’s analyst day in September.

But the new management team under Chief Executive Enrique Salem is more receptive to alternative suggestions than previous executives, said one Symantec investor.

In the meantime, shareholders said another option Symantec could entertain is a significant share repurchase.

Taking on more debt to repurchase shares would allow Symantec to take advantage of the share price, which is down 7 percent this year, while it explores splitting the business or selling it as a whole to private equity and/or industry buyers.

Meanwhile, the company’s sluggish consumer security business has deterred buyers in the past, including Oracle Corp (ORCL.O: ), Hewlett-Packard and Cisco Systems Inc (CSCO.O: ), investors and tech bankers said.

HP and Cisco declined to comment. Oracle was not immediately available for comment.

But as technology companies such as Cisco have broadened their software portfolios, Symantec’s consumer security business could be more attractive.

(Reporting by Nadia Damouni. Editing by Kenneth Li and Robert MacMillan)

Whitworth’s Relational sets sights on Symantec