The consolidation trend now under way in the computer software business continued Thursday as Cupertino, Calif.-based Symantec Corp. agreed to acquire Delrina Corp. of Toronto for $415 million in stock.
Symantec manufactures the Peter Norton line of utility software, which scans for viruses, speeds up the operation of personal computers and increases PC memory.
Delrina is the market leader in personal computer fax software with its Winfax product.
"There's a great opportunity in the merging of telephones and computers," said Gordon E. Eubanks, chief executive of Symantec. "Together the two companies are in a tremendous position to be a major player in desktop communications."
Analysts also called the deal a good match as the companies seek to work with--and compete against--market leader Microsoft Corp.
"For companies to compete in the software industry, they need to have size, distribution and products," said Richard Piotrowski, analyst at Sprott Securities Ltd. in Vancouver, Canada. "Both [Symantec and Delrina] have that."
Symantec will issue about 15 million common shares to Delrina's shareholders to acquire the company. Delrina stockholders will exchange their shares for a new class of stock, each share of which is worth 0.61% of a Symantec share.
Symantec shares closed at $26, down $1.87, while Delrina's stock closed unchanged at $15.38. Both companies are traded on the Nasdaq Stock Market.
Like many other software companies, Symantec and Delrina are preparing programs to be used with Windows 95, the upgrade of Microsoft's operating system. The new Windows, expected Aug. 24, includes features found in Delrina and Symantec's programs, including fax capability and disk management. However, Eubanks said he thinks the new operating system simply expands opportunities for other software producers.
"Both companies believe in Windows 95 and support the emerging industry standards," he said. "So I think in that regard, we're happy about the opportunity to be a bigger player in the Windows 95 market."
Symantec has purchased about 15 companies since its founding in 1982. The latest deals include last year's acquisition of Central Point Software of Beaverton, Ore., another maker of utilities software, in a $60-million stock swap. The year before, Symantec bought Contact Software International Inc. for $47 million in stock.
Thursday's deal represents another step in the consolidation of the software industry. The biggest software merger, International Business Machines Corp.'s $3.5-billion buyout of Lotus Development Corp., closed Wednesday just a month after it began. Also since late May, Adobe Systems Inc. has said it will buy Frame Technology Corp. for $507 million and Computer Associates International Inc. began a $1.8-billion buyout of Legent Corp.
Competition from Microsoft may have kept Symantec from bidding more for Delrina, analysts said. That leaves the door open for another bidder, said David Beck, analyst at Research Capital Corp. in Toronto.
Dennis Bennie, Delrina chief executive, defended the Symantec offer. "This was a fair deal," he said. "Both boards approved it and Delrina's future is as bright as ever."
Bennie will join Symantec as a senior manager, the companies said.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Symantec Corp.'s acquisition of Delrina Corp. for $415 million would create a major player in desktop communications. A brief look at the two companies:
SYMANTEC CORP. * Headquarters: Cupertino, Calif. * Chief executive: Gordon E. Eubanks * 1994 sales: $328.3 million * 1994 profit/loss: -$57.0 million
Delrina Corp. * Headquarters: Toronto, Canada * Chief executive: Dennis Bennie * 1994 sales: $101.1 million * 1993 profit/loss: $16.8 million
Source: Bloomberg Business News