Symantec Makes M&A Moves

Symantec spends $370 million to acquire encryption firms PGP Corporation and Guardian Edge.
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CUPERTINO, Calif. (

TheStreet

--

Symantec

(SYMC) - Get Report

is ramping up its data protection story, spending a total $370 million to acquire privately-held

security software

specialists

PGP

and

Guardian Edge

.

Both PGP and Guardian Edge specialize in encryption technology, a market which IDC estimates will reach $1.7 billion in 2013.

"These technologies nicely complement Symantec's stronghold in the data leak protection market," wrote Michael Bauer, an analyst at FBR Capital Markets, in a note. "These acquisitions help fill product holes that should enable

Symantec to gain further inroads with large enterprises, SMBs, and government agencies."

Symantec, which is up against

McAfee

(MFE)

and

fast-growing newcomer

ArcSight

(ARST)

, is facing

heightened competition

, albeit in an

improving economy

.

With the

recession

disappearing in the rearview mirror, security software makers are now refocusing their attention on

Washington

and Wall Street. The

U.S. government

alone is expected to increase its IT security spending from $7.9 billion in 2009 to $11.7 billion in 2014, and corporate America is

under increasing pressure to lock down its data

.

"We believe these transactions are smart and somewhat necessary for

Symantec to expand its productportfolio in order to keep up with the fast- growing appetite for encryption," wrote FBR Capital Markets analyst Bauer. "That said, given Symantec's spotty track record of integrating acquisitions into the fold, we do believe today's deals are 'prove me transactions.' "

The security specialist, which reports its fourth-quarter results next week,

struggled to swallow its $13.5 billion acquisition of storage software maker Veritas

in 2005, but has high hopes for PGP and Guardian Edge. Symantec, for example, plans to integrate PGP's key management technology into its Protection Center, which consolidates security information from different sources.

The deals will be 2 cents dilutive to non-GAAP earnings per share in fiscal 2011 and accretive to non-GAAP EPS in fiscal 2012, according to Symantec.

Symantec investors were largely unmoved by the company's latest M&A efforts. The software maker's shares dipped 11 cents, or 0.63%, to $17.25 on Thursday, as the Nasdaq rose 0.53%.

-- Reported by James Rogers in New York

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