SAN FRANCISCO -- Computer security giant Symantec Corp. is buying storage and backup program specialist Veritas Software Corp. to create the world's fourth-largest software maker, marking the latest merger in an industry trend that's expected to compress the competition to a few juggernauts.
The all-stock acquisition, revealed yesterday, was initially valued at $13.5 billion, but the price quickly plummeted amid investor worries that the deal signals a sales slowdown at Symantec, the maker of the popular Norton-branded software that fights computer viruses.
Even as the stock market puzzled over why Symantec decided to branch outside computer security to buy a slower-growing company, some analysts praised the deal for creating a more diversified firm better equipped to compete with Microsoft Corp. and IBM Corp.
With the Veritas purchase, Cupertino, Calif.-based Symantec hopes to create a one-stop shop that guards against computer viruses and ensures the reams of vital information stored on corporate networks remain accessible.
Both specialties are in high demand as computer hackers become more proficient in exploiting flaws in Microsoft's Windows operating system and computers become the indispensable information hubs of businesses and households alike.
''This is a profound event for the entire industry," Symantec chief executive John Thompson told analysts during a conference call yesterday.
Investors aren't convinced and shares of both companys fell.
American Technology Research analyst Donovan Gow said the market's negative reaction stems from perceptions Symantec's acquisition is driven by a weakening sales outlook for its security software. These jitters have been amplified by Microsoft's expected expansion into the market with its own antivirus program.
Thompson, who will run the combined company, tried to allay the concerns yesterday.
''This is not a defensive move by any stretch of the imagination. It's an offensive move," he told analysts.
Veritas chief executive Gary Bloom yesterday said, ''When you share as much symmetry as we do, things can happen pretty quickly." Bloom will be the merged firm's vice chairman and president.