The leading computer security company, Symantec Corp. (SYMC) recently declared its intention of acquiring privately held legal discovery solutions provider Clearwell Systems Inc. for $390.0 million.
The acquisition will enable Symantec to expand its end markets and open up the opportunity of cross selling its backup and security products. The payout will be made after deducting Clearwell's $20.0 million cash balance from the purchase price.
The acquisition is expected to increase Symantec's ability to get the right information within the stipulated time to the target customer, while reducing the overall legal review cost and reducing risks to a certain extent.
Though the acquisition is expected to impact adjusted earnings by 1.5 cents per share in fiscal 2012, it has the potential to boost the same in fiscal 2013.
After the news of the acquisition broke, shares of Symantec shares fell 11 cents to close at $19.57 at the end of the trading session.
Last year, the company incurred acquisition costs of around $2.0 billion, including the $1.28 billion takeover of VeriSign Inc's (VRSN) authentication unit, which was under pressure to either split up or divest its storage division.
Research firm Gartner estimates "electronic discovery" or the categorizing and processing of the data market to grow $1.7 billion by 2014 and the company expects to seize this opportunity as it is a leading player in this space.
Given significant share in the fast-growing security market, the acquisition of VeriSign’s identity/authentication business and the expected acquisition of Clearwell Systems Inc., we believe that Symantec will be able to capitalize on opportunities in the security market.
We have a positive outlook on Symantec based on continuous product launches, positive feedback from customers and channel partners, and strategic ties with VMware Inc. (VMW) and Salesforce.com Inc. (CRM).
Despite intense competition from big and small players including Microsoft Corp’s (MSFT) new windows operating system, we believe Symantec will be able to deliver decent results in the coming quarters given its history of execution.
Currently, Symantec has a Zacks #3 Rank, implying a short-term Hold recommendation.
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