Symantec, Veritas to Combine Happily

This column was originally published on RealMoney on June 16 at 4:01 p.m. EDT.

In two to three weeks, one of the oddest technology mergers of recent years will close, and investors will begin to focus on the possibility that maybe it wasn't such a crazy idea after all.

Of course, I am referring to the uncelebrated marriage of antivirus software maker Symantec(SYMC Quote) and storage software vendor Veritas Software(VRTS Quote), which was announced in December last year, then met with a great big raspberry from Wall Street. Five months after the announcement, Symantec shares sank 45% and Veritas shares fell 15%.

The skepticism wasn't about the companies' particular attributes. It was about whether they would really be better off under the same management. For on the surface, it was hard to see how salespeople for the largely retail-oriented Symantec would benefit from the addition of a line from the entirely enterprise-oriented Veritas.

Individually, they have been longtime leaders of their market niches: Symantec with its flagship Norton suite of downloaded or boxed products, and Veritas with its wide range of products aimed at the high end of large corporations' data backup and warehousing needs.

And individually, their shareholders benefited handsomely until recently. Symantec shares rose 2,575% from 1990 through the end of last year, vs. a gain of 370% for the Nasdaq Composite. Veritas rose 10 times that much, a whopping 29,600%, from the time of its initial offering in 1993 through late 2000. Even after the bursting of the tech bubble, its shares are still up 4,100% from their IPO.

The question now is whether these two fallen stars can get their lights aligned for the next era of computing, a period in which security and storage may be even more important than in the prior era. The problem is that they both have much more competition now than when they started in the early 1990s, with the most frightful shadow being cast by Microsoft(MSFT Quote), which has vowed to start selling a security software suite of its own next year.