Symantec's $2.3B purchase of LifeLock Aims to Revive Consumer business

The $2.3 billion purchase of identity protection company LifeLock  (LOCK) should kick-start growth in Symantec's  (SYMC) lagging consumer security business, CEO Greg Clark told investors in a Monday call.

Few targets in the consumer cyber-security market could have moved the needle for Symantec, which has a $15 billion market cap and about $4 billion in projected annual revenue. The purchase comes just months after Symantec closed the $4.7 billion purchase of Blue Coat Systems, which serves enterprises and government clients. Management will have to balance two major purchases in different segments of the cyber-security market.

"There wasn't an easy fix to the consumer business unit without LifeLock," said Wunderlich Securities analyst Bill Choi.

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Symantec owns the Norton antivirus software brand and mobile security products. It recently launched an identity protection product akin to LifeLock.

Symantec expects its consumer security revenue to drop about 6% in the third fiscal quarter of 2017 to about $400 million. The company forecasts a 25% to 28% rise in enterprise sales, to about $640 million.

Achieving growth in the consumer segment was taking too long, Choi suggested.

"There's hope for mobile but, let's be frank, most people aren't buying security products to protect their cell phones," the analyst said. "Identity protection is something that people are paying for, in higher prices than even malware protection." 

LifeLock was in play after pressure by Paul Singer Elliott Management. The bidders reportedly included private equity firm TPG. Earlier this year TPG invested $1.1 billion in Intel's  (INTC) McAfee unit, which also has a consumer businesses that could benefit from LifeLock's operations.

"It you figured out that this is a pocket of the market that consumers are willing to pay for, it only made sense that you would get up to scale immediately," Choi said, especially since LifeLock was on the market and could go to a PE firm with its own cyber security interests.

The payout comes to 3.1 times projected 2017 sales, according to UBS. Symantec expects to cross-sell security products between LifeLock's 4.4 users and its own base of 50 million Norton customers.

Symantec CEO Clark told investors that management would not lose focus by launching two major acquisitions in different market segments.

"The consumer business and the enterprise business are separate business units, and they have separate management team construction throughout the organization," he said.

Clark told shareholders it was too early to talk about a spinoff of either the consumer or enterprise businesses. "At this time, we have a really strong setup for the Symantec shareholders," he said during the call.

The topic is not merely academic. Symantec planned a spinoff of its Veritas storage business in late 2014, before selling the operation to Carlyle Group  (CG) for $7 billion. "I think it's too early to speculate another construct," Clark said.

After spending about $7 billion in just about a year, he said the company does not plan more acquisitions. Symantec expects to close the LifeLock acquisition in the first quarter of 2017.

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