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Broadcom intends to acquire Symantec's enterprise cybersecurity business for $10.7bn in cash. By once again marrying itself to a largely unrelated business, Symantec may be destined to relive its failed Veritas era. The deal is the unfortunate result of shareholder discontent with Symantec management missteps and an uneven effort to turn the enterprise business around.

It's the end of Symantec, as we know it

Recent history has proven that the union of an enterprise cybersecurity software specialist with an unrelated IT business is a difficult proposition.

Case in point: Intel spent $7.7bn to buy McAfee in 2011 with the intent to dominate embedded systems security, but the synergies never materialized; Intel spun out and sold a majority stake of McAfee in 2017 for about $2bn.

Similarly, Symantec merged with Veritas in 2004 in a $13.5bn deal, driven by potential synergies in providing fast, secure access to enterprise data storage hardware. The combination never resonated with a critical mass of customers; a decade later, Symantec spun out and sold Veritas for $8bn.

Regardless, Symantec announced a deal on Thursday in which its enterprise cybersecurity business will be acquired by chipmaker Broadcom for $10.7bn in cash. Upon completion, Symantec will become a software brand within Broadcom alongside other software acquisitions, Brocade and CA, while the Symantec consumer business will become a standalone company, likely operating under the Norton/LifeLock brand. Prior to finalizing the sale, Symantec will also reduce its workforce of about 12,000 people by approximately 7%.

This time around, there is little pretense about supposed synergies. One company seeks revenue gains by acquiring an established software vendor, and the other desires to placate jaded shareholders looking for predictability.

Broadcom, despite being known as a semiconductor vendor, increasingly positions itself as a provider of varied infrastructure solutions. With Symantec, Broadcom would add security to a menu of software offerings that includes storage and systems management.

Symantec, meanwhile, has been rocked of late by the resignation of CEO Greg Clark in May, an internal investigation in 2018 that discovered $12m of improperly recognized revenue, and a shareholder lawsuit accusing Clark and others of intentionally manipulating revenue to inflate executive bonuses.

Combine all that drama with years of uneven revenue and earnings results from an enterprise business that has long struggled to establish itself among a vast field of nimble, innovative competitors, and it's easy to understand why investors signaled they had had enough.

Symantec interim CEO, Richard Hill, a longtime former semiconductor industry executive who now specializes in corporate turnarounds, sought to quickly clean up the mess. His solution? Sell off everything he could while the market valuation for cybersecurity providers remains relatively high.

It should be noted that the deal may encounter close regulatory scrutiny, and is not necessarily guaranteed to be approved. Broadcom's bid for telecommunications vendor Qualcomm was blocked last year by the Trump administration, which cited Broadcom leadership's alleged ties to the Chinese government. Its attempt to purchase Symantec may be treated similarly, given Symantec's position as a provider of security technology for numerous critical infrastructure organizations in the US.

Symantec's brand and its enterprise solutions will carry on under Broadcom, but as it takes its place alongside a portfolio of legacy software assets, it is difficult to imagine the move having positive effects on Symantec's renewed strategic focus, its significant if often unheralded innovation, and its ability to compete.

Perhaps the move won't mark the beginning of Symantec's long, slow decline to irrelevance, but it is a worst-case scenario that must be considered. As the pioneer of the antivirus market and one of the most well-known brands in the business, Symantec deserves a better fate. Tragically, if history is any indicator, the acquisition will only prove to be a boon for Symantec's competitors.


Further reading

"Symantec's latest CEO change reopens questions about its identity and its future," INT005-000003 (May 2019)

Symantec Integrated Cyber Defense Exchange (ICDx), INT003-000283 (November 2018)


Eric Parizo, Senior Analyst, Infrastructure Solutions

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