Leading Internet security solutions provider Symantec Corporation (SYMC) has more or less agreed to buy the authentication service unit of VeriSign Inc. (VRSN) for a lump sum value of $1.3 billion. Recently, VeriSign has been scouting for buyers for its security business. The company’s security system encrypts the credit card information of the customer during an online credit card transaction.
While the sale consideration has been determined, the final agreement between the parties should be signed some time this week.
The sale of its authentication service unit is expected to provide VeriSign with the opportunity to focus on its core business, which is the maintenance of over a million Internet domain names.
The authentication business contributed $101.9 million of VeriSign’s revenue in the March quarter and $410 million during the last year. This is not the only sale completed by VeriSign recently, as the company already sold around twelve of its business units in the current fiscal year. The company’s sole purpose is the creation of a leaner organization structure and management’s refocus on the (.com) and (.net) registry business.
Historically, Symantec has always grown through business diversification and acquisitions. Acquisitions over the past few years include Altiris in April 2007, which was a leading provider of service-oriented management software, and MessageLabs in November 2008, which is the leader in online messaging security.
For Symantec, the successful completion of the acquisition would increase access to the credit card encryption security business. As a result of increasing credit card frauds reported across the globe, all major credit card issuers are using credit card information encryption technology to safeguard the interest of customers. This has resulted in the expansion of the market for this technology.
In the recently-concluded fourth quarter of 2010, Symantec reported net revenue of $1.53 billion, up 3.0% from the year-ago quarter, while earnings per share of 40 cents exceeded the Zacks Consensus Estimate by 7 cents. The strong product portfolio, growth prospects in all its served markets, acquisitions and customer win momentum are positives for Symantec.
On the other hand, we are a bit concerned about the intense competition that the company faces from big and small players, as well as hardware and software manufacturers entering the IT security business.
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Read the full analyst report on “VRSN”
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