Spotlight - Symantec - Bloomberg

Now my first guest is the CEO of the world's largest maker of security software. Symantec trimming costs in order to cope with the slowdown in technology spending, also taking steps to regain market share lost to smaller rivals. The company has been hungry for acquisitions, buying at least 24 businesses in the past 5 years. Enrique Salem, he took over as the CEO of Symantec in April, and he joins us now. Enrique, thank you very much for joining us. Good to have you with us. Before we get to the details of what's going on with Symantec, because I know you've got sort of 3 areas you want to talk about as far as driving the growth in the company. What about the growth of censorship that we're seeing in places like China, places like Iran? Is the internet really a place where you can impose censorship?

I think what happens is the internet is something that's accessible from a cell phone to a laptop computer, and I think what happens is you end up in a situation where if you want to access the internet it is very difficult to censor because what it means is wherever you are, you can get out. And even if they can identify a device or a user, you can go through proxy servers or other technologies that will allow you to get out onto the internet. And so I actually think enforcing any kind of censorship on the internet is pretty futile.

So is it almost as if it's a, it's like a balloon where you start squeezing in one area and the air pocket moves somewhere else?

Well, ultimately It's a bit like that, but it's also that the Internet was designed in a way that the goal was that there were multiple redundant paths in and out of any location. That was what it was designed around, because DARPA, or the defense industry, wanted to have something that was resilient in case of a major attack. And so what that did is it made it possible to have lots of routes in and out of any one point. And so I think it's pretty hopeless to try and say we're gonna control all access to the Internet, unless you basically start cutting it off into the country.

Talk about the technical aspect of this. We've noted kind of the irony that you've got firewalls that surround corporate internets and intranet use, whether that be for security purposes. Is it technically possible for governments to impose the kind of censorship that you've read about and that you've learned about?

I think it's very difficult to impose complete censorship, because as soon as you start allowing traffic in and out of any location, there's a lot of ways to get around firewalls. If you want to send something out, Now, hacking in may be a little different situation. But, for example, you can do things that encrypt traffic and then get it out and then have it decrypted. And so you don't know what you would be blocking. So there's a lot of ways to get around some of these security systems that these countries are trying to impose.

[Speaker:JUAN GONZÁLEZ] When we talk about security systems, I mean, how good is the security? Is it only as good as the weakest link in all of the security apparatus? I mean, because, as you said, whether it's mobile technology, whether it's PC-based technology, there are a lot of access points.

[Speaker:JOHN KIRIAKOU] That's exactly right. And so you, you hit it exactly right where you said it's the weakest point, or it's the point that you maybe don't completely control. And so if you can basically find a place that allows internet access, uh, for whatever reason it might be, uh, because a lot of our countries or businesses are now based on that access. So if you shut it all off, you're gonna do significant damage to commerce. And so there will always be ways to transmit information over the internet. And so I think it would be a very difficult task unless you're really gonna shut off all web traffic, or what we call HTTP traffic.

Talk just, if you can, I'll give you about 30 seconds. We're going to talk in detail about Symantec, but this idea that what's happening in Iran, what's happening in China in terms of censorship or limiting access, what could that do to the growth of, of internet? Because, for example, in China, internet growth is a very important part of the economy.

Yeah, I think it's, you know, when you look at what the internet is being used for, all of our lives are becoming more dependent on internet access. And so if you start cutting off internet access you're gonna hurt productivity. And so it will be a detriment to those economies if they go out and say, "We're gonna shut it off. We're gonna make it so that people can't use it." It will absolutely impact GDP.

All right, we're gonna continue the conversation. We're gonna find out about the effects of IT spending on the world of Symantec. We know that businesses, they're storing vast amounts of data. The big question right now is, is the government going to give those businesses a boost? We know that there's a reform program in Washington for healthcare. Healthcare, IT, security. We're going to find out more with Enrique Salem of Symantec. This is Taking Stock on Bloomberg. My guest, Enrique Salem. He is the CEO of Symantec. Now let's talk about Symantec specifically. I know that you just took over as the CEO of the company in April. On the most recent earnings conference call, You said what you want to do is you want to take advantage of the scale of Symantec in a variety of different business areas. You want to focus first, you want to do the enterprise business. What's the status right now? Still delaying on a lot of IT budgets, or are they just doing a lot of maintenance contracts?

What you're seeing is a couple things. When I talked about the scale of Symantec, I was speaking to— today we're about $6.2 billion in revenue, so we are the fourth largest software company in the world. And what that affords us is the resources to go focus on a few areas. When we talk about security, customers are absolutely still worried about protecting their information. We're producing information at an alarming rate. Information's growing at 60% per year, and that information needs to be protected. I'll give you a statistic. Last year, we wrote 1.6 million signatures, or fingerprints, to protect our customers. That is more than we'd written in the previous 17 years. The bad guys are starting to target individuals very aggressively. They're basically saying, how do we get at your confidential information? And so that means they need security. Whether the economy is up or down, security is still very important.

Okay, but I'm talking about security, let's say, from the enterprise perspective, right? I mean, this is from the corporate perspective. Are they spending the big bucks for, for new types of security, or are they really just right now maintaining their security contracts and saying, all right, we'll pay you that subscription fee, but we're not so are sure about buying into any new system?

Well, what they're looking for is return on investment. They're trying to figure out, can they put money to work that gives them a near-term ROI? In security, though, every company that I talk to says about 10% of the information they have is their secret sauce, their crown jewels. And today, right now, they continue to buy what we call our data loss prevention products. So people can't copy, let's say, 100 customer records onto a USB device or a thumb drive. Because that would absolutely hurt the company if you lost that information. So right now, even in this environment, companies are continuing to see the importance of protecting the information they use every day to run their business.

Alright, what's the— what's the— what is the next generation data protection look like?

When you think about protecting data, a lot of our customers have talked about how they back up their information to tape drives, but that's no longer it's no longer efficient enough. And so they're moving to saying, what is it we need to back up? And let's not back it up to tape, let's put it on disk, which is much more— it's quicker, it's more reliable. And so what we're finding is they're moving to new ways of backing up their information so they can recover it. There's other technologies that become very important, things like data deduplication. Because if you think about it, lots of times people create the same content and they send it to 20 people inside of the company, and then you back it up 20 times. So deduplication, making one copy that gets backed up, becomes very important because otherwise you can't keep up.

In that, in that kind of strategy of data duplication, are you seeing any compression of margins on that side? Because it seems as though if you're going to move from tape to disk, if you're going to do storage area networks or fiber networks of any kind to actually get to the data and keep it stored, Is the price of storing it all coming down?

Well, what's happening— our margins have actually done very well. Last year, our margins went up 350 basis points over the year, which was ahead of what we had expected to do. So we're not seeing margin pressures as a result of this move. We quite frankly are seeing our ability to continue to expand what we do because customers are buying a range of our data protection products. Email archiving, or archiving and backup, are both really important to our customers.

Talk, if you can, a little bit about this transition to the world of software. Software as a Service. I mean, it's been talked about for many years now, really. It's prevalent in areas like customer relationship management software. But what about in the security and storage space? How does that work in your business?

Well, what's happening is customers are saying, what do I need to do on-premise? What do I need to do myself? And quite frankly, things like message filtering. Let's say you want to eliminate spam and viruses from coming into your environment via email. Well, you can run it through our data center and we'll clean it up. You shouldn't have to receive it. It's much more efficient if what you get is the good stuff, the stuff that your employees need every day to work. Uh, from a storage perspective, today Symantec has 8 million customers that are backing up their data to our data center. We're talking 41 petabytes of storage we currently have in our data center, growing at 5 petabytes a quarter, because people are saying, I want to back up my data, but I don't want to have all the infrastructure in my environment. And so they're saying to us, you do it, you take care of it, and when we need it back, we'll come and get it out of your data center over the internet.

So you become almost a data provider as, as well. If you become that kind of trusted source as a data provider, what's the outlook for that business vis-à-vis what we're hearing from Washington in terms of— let's just stick to healthcare information technology— this idea that we're going to digitize a whole bunch of medical data, whether it is x-rays or whether it is particular information that is related to a patient.

Well, what's happening is we're creating more and more digital data every day, and if you think about what's happening in healthcare, there's digital records, or your records, that need to be protected from a privacy perspective, and you need to be able to move them from a hospital to another doctor. So you need to be able to transmit them securely over the internet. The second thing that's happening is When you go into the hospital, let's say they take an X-ray or they take a CAT scan, that image is significantly larger than it was just a couple of years ago. And so storing that in a way that can be efficient and then transferred to other doctors, there's a whole set of needs in that area. And so when I talked about online backup, it's the same issue with healthcare IT, where ultimately what we're trying to do is make it easy for hospitals or healthcare providers to be able to move information very, very efficiently over the internet.

Alright, I want to thank you very much, Enrique Salem, coming in as the CEO of Symantec, sharing your thoughts on storage security and, well, the next generation of data protection. Thank you very much.