Norton antivirus software maker Symantec has agreed to sell its data storage unit Veritas for US$8 billion (A$11 billion) to a group led by Carlyle Group as it seeks cash to turn around its core security software business.
The deal, the biggest US leveraged buyout this year, will give Symantec much-needed funds to compete in the information security market with companies such as Microsoft, Intel and Kaspersky Labs.
Shares of Symantec, which also reported weak quarterly results today, fell as much as 6 percent.
Symantec has been facing headwinds as weak PC sales hurt demand for its security software, which comes bundled with computers. Demand for antivirus software has also fallen as users turn to advanced products for protection against sophisticated cyber attacks.
"Now they really get a new lease on life in terms of focusing on their core security DNA as the Veritas storage piece has been a massive black cloud on the Symantec story for a decade," FBR Capital Markets analyst Daniel Ives said.
Symantec is expected to use the proceeds to make inexpensive acquisitions as lofty valuations leave few security companies within its reach.
"If you think about potential acquisition candidates, those will be names like Proofpoint, Qualys, Fortinet as well as a host of private companies," Ives said.
Symantec has long stayed away from network security products. The fast-growing market is dominated by companies such as Palo Alto Networks, FireEye and Check Point Software Technologies.
"We don't expect them to shift to network security. It seems like they are not well positioned for that," William Blair & Co analyst Jonathan Ho said, adding that one area of growth could be security analytics.
Symantec could leverage its large customer base to collect data and use analytics to determine if there are indications of security breaches to provide better protection, Ho said.
Symantec, which bought Veritas for US$13.5 billion in 2005, said it expected about US$6.3 billion in net proceeds. The sale is expected to close by Jan. 1. The buyer group includes Singapore's sovereign wealth fund GIC.
Symantec also raised its stock buyback program by US$1.5 billion.
Revenue from Veritas, which accounts for nearly 40 percent of Symantec's revenue, fell 10 percent in the first quarter.
The company also reported lower-than-expected revenue and profit for the quarter and forecast second-quarter earnings and revenue below analysts' expectations.
Symantec shares were down 5.8 percent at US$21.59 in afternoon trading.