Symantec Wraps Up Clearwell Deal

Leading computer security company Symantec Corp. (SYMC - Analyst Report) has closed the previously announced (May 22) acquisition of privately held legal discovery solutions provider Clearwell Systems Inc. Symantec had to pay $390.0 million (net of cash) for the deal.

Clearwell is now part of Symantec’s Information Management Group. The eDiscovery solution of Clearwell complements and enhances Symantec’s Enterprise Vault eDiscovery capabilities to create a more complete end-to-end eDiscovery solution. With similar lines of business, we believe Clearwell’s eDiscovery platform will not take much time to be integrated. Symantec will benefit from lesser legal review cost, time and threats to eDiscovery across vital information sources like email, desktops, file servers, backups and the cloud.

The acquisition also expands Symantec’s end markets and opens up the opportunity to cross sell its backup and security products. Symantec expects the acquisition to be dilutive to its non-GAAP earnings roughly by $0.015 per share in fiscal 2012. However, the deal will start being accretive by early 2013.

According to the U.S. research firm Gartner, eDiscovery software market will likely grow at a compounded annual growth rate of 14.0% and will have a $1.7 billion prospect by 2014. With capabilities from Clearwell, Symantec seems to be well positioned to capitalize on this emerging space.

Apart from this, we remain encouraged by Symantec’s significant share in the security market, which got a boost from the acquisition of VeriSign Inc.’s (VRSN - Analyst Report) identity/authentication business.

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 - Snapshot Report) and Salesforce.com Inc. (CRM - Analyst Report).

However, fierce competition from bigger players could limit Symantec's share gain in storage and security software markets. The recent acquisition of McAfee Inc. (MFE) by the semiconductor giant Intel Corp. (INTC - Analyst Report) could fuel competitive pressure in the security software space.

Currently, Symantec has a Zacks #3 Rank, implying a short-term Hold recommendation.

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