Veritas Software Corporation Business Information, Profile, and History

Company Perspectives:

Veritas Software Corporation is the leading provider of storage management software for data protection, application availability, and disaster recovery. Over 86 percent of the Fortune 500 companies rely on Veritas Software storage management solutions that offer proven interoperability across diverse applications, servers, storage hardware, and appliances. With more than 5,500 employees in 31 countries and annualized revenues of $1.5 billion in 2001, Veritas Software ranks among the top 10 software companies in the world, as measured by market capitalization and revenue.

History of Veritas Software Corporation

Veritas Software Corporation is a leading supplier and developer of data availability software in areas such as storage management, data protection, and system backup and recovery. Through alliances with leading original equipment manufacturers (OEMs), Veritas software is embedded in a wide range of computer products, from workstations to servers.

Providing System Backup and Recovery Software for Unix Systems: 1989-95

Established in 1989, Veritas Software Corporation had its roots in a 1982 start-up called Tolerant Systems, Inc. From 1982 to 1989, Tolerant Systems manufactured computer hardware for Unix-based systems. By 1989 the company was about to go out of business. One division of Tolerant was focused on developing software utilities to enhance the Unix operating system. Claiming one contract with AT&T Corp., the creator of the Unix operating system, and about 20 employees, Veritas Software was created out of that division in 1989.

Unlike its predecessor, which manufactured computer hardware, Veritas focused on software. Its joint development and marketing agreement with AT&T called for Veritas to develop the next generation of storage management software for the Unix operating system. Mark Leslie, formerly a member of Tolerant Systems' board of directors, became Veritas's president and CEO.

From the start Veritas pursued a strategy of supplying original equipment manufacturers (OEMs) to ensure a certain level of revenue. In addition to AT&T, the company signed agreements with other leading Unix companies, including Hewlett-Packard, Sequent, Tandem, Digital Equipment Corp., IBM, and Sun Microsystems. Under these agreements, Veritas would license its system recovery software to the OEMs while protecting its source code. Firms to which Veritas licensed its software were not allowed to work on competing development projects if they learned the Veritas source code.

Veritas's software addressed a major problem with Unix-based systems, namely, that it could take several hours to recover from a system crash. The Veritas software program maintained a file journal that made it possible to restart a Unix system in a matter of seconds, with its files intact. When the system ran normally, Veritas software enabled system managers to perform routine maintenance tasks without having to bring the system down.

From 1990 to 1995 Veritas's sales grew at a rate of 60 percent annually, and in 1993 the company went public. Annual revenue was about $13 million. The company's strategy for the next couple of years was to extend its product line horizontally, adding functionality to its basic storage management software. In addition, Veritas designed software extensions that could add value to the basic package's existing features. By 1995 the company was able to reduce its reliance on the OEM market by shipping shrink-wrapped software products directly to end-users.

Expanding Beyond Unix Market: 1995-97

In the second half of the 1990s, Veritas expanded beyond providing system recovery and storage management software for Unix-based systems. The company signed a licensing agreement with Microsoft Corporation to provide storage management software for the Windows NT operating system.

In 1996 Veritas acquired Advanced Computing Systems Corp. (ASCS), a company that developed APIs (application program interfaces) for storage software. The APIs provided programmers writing application programs with a specific method by which to make requests of an operating system or other application. ASCS's technology provided for a consistent way for software to communicate with different types of storage media. ASCS's API-based software supported optical, magneto-optical, and most tape formats. Following the acquisition, Veritas announced plans to introduce a VxServer Suite Web Addition that would incorporate ASCS's technology and utilize Veritas's file and volume management software to optimize disk configuration and performance on web servers.

In 1997 Veritas added system backup software capabilities to its product line with the acquisition of OpenVision Technologies, Inc., a leading developer of backup software. The acquisition helped Veritas gain credibility among OEMs and enterprise customers for its broader vision of storage management. In mid-1997 Veritas introduced NetBackup 3.0 for Windows NT, the first version that could run on a Windows NT Server without files having to be transferred to a Unix server. With its expanded product line, Veritas was able to offer end-to-end solutions for storage management, system recovery, and backup.

For 1997 Veritas saw its profits increase dramatically, from $12.1 million on revenue of $72.7 million in 1996 to $22.7 million on revenue of $121.1 million in 1997. During the year the company signed licensing agreements with Sun Microsystems and Hewlett-Packard to provide backup software and high-end storage management systems for the two companies' Unix-based systems. At the end of 1997 Veritas software could be found on computer systems in 90 percent of the world's 2,000 largest companies.

Introducing New Storage Applications: 1998

At the beginning of 1998 Veritas introduced three new storage management products: Storage Manager, Storage Advisor, and Storage Planner. Together, the three software products comprised the company's Intelligent Storage Management product set. Storage Manager provided a central management interface from which distributed storage objects could be monitored and managed. Storage Advisor analyzed system configurations and recommended storage layouts to optimize system performance. Storage Planner was a forecasting tool that helped predict future storage needs.

Later in the first quarter Veritas announced new versions of its Volume Manager and File System management software for Sun Microsystems' Solaris operating system. The company also introduced the Veritas Storage Replicator for File Systems (SRFS), which let IT managers mirror data at remote locations without restricting user access. SRFS provided an alternative to hardware-based mirroring and could be used to redistribute data to multiple locations to reduce bottlenecks. Excite Inc., which tested SRFS for its web search engine, reported that Veritas's SRFS would help streamline the time-consuming process of duplicating files.

Veritas's Intelligent Storage Management product set formed the basis for the company's next generation of storage management products, which would focus on storage area networks (SANs). SANs offered high-speed connectivity and switch-based architecture that provided some support for "failover functionality." In a SAN environment, all servers had access to storage and that storage was networked. When one device in a system failed, data in the SAN could easily be routed to another device. Veritas code-named its new clustering application Thor. Thor was capable of providing failover support for up to 128 nodes in a SAN and would be able to run on Windows NT as well as Unix-based systems. When Veritas introduced its Cluster Server software in September 1998, the new software allowed the clustering of 32 servers, which meant that one idle server could provide failover support for the other 31 servers. Later in the year Veritas added modules to its Storage Manager software that helped customers manage disparate servers, storage subsystems, adapters, and other components of SANs. The new modules monitored and managed all aspects of a SAN, thus giving organizations secure universal access to data.

Before the end of 1998 Veritas signed partnership agreements with Compaq Computer Corporation and Data General Corporation. Under the agreement with Compaq, the two companies would jointly develop and market storage solutions that combined Veritas's storage management software with Compaq's enterprise-class storage hardware systems. Data General agreed to bundle Veritas's NetBackup for Windows NT with its Windows NT server line under an OEM licensing agreement.

Acquiring Multiplatform Strength: 1999

In October 1998 Veritas announced it would acquire Seagate Software's Network and Storage Management Group, a unit of storage hardware manufacturer Seagate Technology, Inc., for $1.6 billion in stock. By the time the transaction closed in May 1999, it was valued at $3.1 billion. Mark Leslie remained as CEO, with Seagate Software President and Chief Operating Officer (COO) Terry Cunningham becoming president and COO of Veritas. Cunningham also joined Veritas's expanded board of directors, as did Seagate Technology President and CEO Steve Luczo and Seagate Software Chief Strategic Officer Greg Kerfoot.

Seagate's Network and Storage Management Group was considered to be the largest supplier of Windows NT and NetWare storage software. In addition, the company had a strong distribution channel and a team of experienced developers and marketers. The acquisition would enable Veritas to offer a single storage management product with multiplatform capabilities. Veritas was now in a stronger position to integrate the enterprise segment of the storage market, which had a Unix focus, and the workgroup segment, which had an NT focus.

During 1999 Veritas continued to preach the benefits of SANs and to develop initiatives that would make SANs more attractive to business enterprises. In January 1999 Veritas and Storage Technology Corp. entered into a joint venture to develop and market a standard interface for managing removable storage. The two companies planned to deliver a media server, or software controller, that would link tape libraries across mainframe, Unix, and Windows 2000 platforms in 2000. Also in January Veritas released its Global Data Manager for NetBackup, which could manage data internationally throughout an enterprise. Global Data Manager enabled IT managers to control multiple master servers that ran NetBackup from a single console. Veritas subsequently integrated Seagate's BackupExec with Global Data Manager.

In the first half of 1999 Veritas acquired TeleBackup Systems, Inc. When Veritas released a new version of Seagate's Client Exec online backup solution, it was renamed TeleBackup for Workgroups 2.5. Priced at $7,600 for 200 users, TeleBackup was considered a low-cost solution.

In September 1999 Veritas acquired ClusterX technology from NuView, a software company based in Houston with close ties to Microsoft. ClusterX was a tool that helped administrators manage two-node Microsoft Cluster Service clusters in an enterprise from one console. Veritas and NuView planned to integrate their offerings to develop a single Windows NT console that could manage clusters across platforms. The acquisition was part of Veritas's strategy to develop centralized management consoles for SANs. When Microsoft released Windows 2000, the new operating system had embedded in it some of Veritas's storage management technology.

From 1998 to 1999 Wall Street drove up Veritas's stock price by 255 percent, according to Forbes. For 1999, Veritas had revenue of $596.1 million and a net loss of $503 million, compared to revenue of $210.9 million and net income of $51.6 million in 1998. Much of Veritas's net loss in 1999 was due to depreciation and amortization charges of $510.9 million and an increase in selling, general, and administrative expenses from $86.9 million in 1998 to $256.2 million in 1999.

New Alliances and Products: 2000-2001

At the beginning of 2000 Veritas expanded its alliance with Japan's NEC Corporation, with NEC selling and supporting Veritas's full line of software and adding Veritas's Backup Exec to more of its servers. Veritas also entered into a development agreement with Oracle Systems Corporation to facilitate the integration of the two companies' products. Early in the year Veritas and Network Appliance, Inc. introduced an integrated application solution that combined Veritas's Cluster Server with Network Appliance's storage appliances. Around this time Veritas also introduced Backup Exec 8.0 for Windows NT and Windows 2000. Enhanced features of the new version included improved protection of remote systems, improved disaster recovery, and centralized administration and management.

Later in the first half of 2000 Veritas released improved versions of its clustering software. The Cluster Server for Windows NT allowed IT managers to link as many as 32 Windows NT servers. At the time, the Microsoft platform could cluster only two nodes on its own or up to eight nodes with an IBM extension. In June Veritas released its Global Cluster Manager for Solaris, which enabled customers to manage and monitor as many as 256 clusters running NT, Solaris, and HP-Unix from a single Java-based console.

Meanwhile, Seagate Technology, Inc., which owned approximately one-third of Veritas's common stock, decided to become a private company. Under the terms of a complex financial deal, Veritas acquired Seagate, including its interest in Veritas, for about $20 billion. Veritas then sold Seagate's operating assets to an investor group led by Silver Lake Partners and Seagate executives and employees, for $2 billion. The transaction unlocked the value of Seagate's interest in Veritas, which had increased in value to about $18 billion as Veritas's stock price rose, and eliminated Seagate's ownership interest in Veritas. It also resulted in fewer outstanding shares of Veritas stock and increased the company's stockholder liquidity. When the deal closed in November 2000, the transaction was valued at $12.1 billion.

In mid-2000 Veritas addressed IT managers' need for better administrative tools to deal with SAN management with its announcement of SANPoint Control. Using new technology called V3 SAN Access Layer technology, SANPoint Control could map all of the storage utilities on a SAN, regardless of vendor, thus providing a single point of management that allowed viewing of the entire virtual SAN. Realizing that SAN management was an emerging industry, Veritas designed SANPoint Control to be easily modified for future changes. The company planned to ship Version 1.0, which provided basic SAN event management, in August 2000. Version 1.1, which offered advance notification to managers during storage emergencies, was due to ship by the end of 2000. Version 2.0, which provided the highest level of management intelligence, was scheduled for release in early 2001.

In November 2000 Veritas scored a management coup when it lured Gary Bloom from Oracle, where the executive vice-president was considered the next in line to succeed Oracle Chairman and CEO Larry Ellison. Bloom joined Veritas as president and CEO, with Mark Leslie remaining as chairman.

Throughout 2000 Veritas continued to experience strong demand for all of its data availability products, including data protection, file and volume management, clustering, and replication. The company reported record third quarter revenue of $317.2 million, compared to $183.4 million for the same quarter in 1999. For all of 2000 Veritas reported revenue of $1.2 billion and a net loss of $619.8 million.

Economic Slowdown Affecting Sales: 2001

At the beginning of 2001 the stocks of Veritas and other storage management companies were being downgraded by some Wall Street analysts. Analysts and officials within the industry disagreed, believing that storage was an essential area that would not be affected by an economic downturn. A study by the Yankee Group predicted that corporate spending on storage hardware, software, and related services would add up to $12 billion in 2001. However, by the end of March it was clear that storage companies would also be affected by the economic slowdown.

During the first quarter of 2001 Veritas added the capability to backup and recover Linux-based data to its NetBackup DataCenter and NetBackup BusinessServer. Veritas invested in managed storage startup Sanrise Group Inc. and in Pirus Networks, a storage networking company, as part of its strategy to invest in developing companies in the data availability market. Veritas also acquired Prassi Europe SAS, a company based in Le Mans, France, that produced CD and DVD mastering technology.

Noting a difficult selling climate in the first quarter of 2001, Veritas reported quarterly revenue of $387 million, a 58 percent increase over the same period of 2000 and 5 percent above the previous quarter. License revenue accounted for $309 million, while revenue from services was $78 million. For its second quarter, Veritas had revenue of $390 million, a 42 percent increase over the same period in 2000. By July, though, president and CEO Gary Bloom reduced the company's growth target to 25 percent. From the time Bloom joined the company in November 2000 to September 2001, Veritas's stock had lost 60 percent of its value. Forbes noted that Veritas still had $1.5 billion in cash and that its market capitalization of $16 billion would let it continue to make acquisitions.

Veritas's third quarter revenue was affected to some extent by the events of September 11. While reporting sales of $340 million for the quarter ending September 30, Veritas said that it had helped more than 100 of its customers recover lost data due to the terrorist attacks. Citing low visibility, the company refused to predict what its revenue would be going forward. Closing out the year for Veritas, Gary Bloom was named chairman, adding the title to that of president and CEO. Former Chairman Mark Leslie would remain on the board of directors.

Principal Competitors: Computer Associates International, Inc.; EMC Corporation; International Business Machines Corporation; Legato Systems, Inc.; Storage Technology Corporation.

Chronology

• Key Dates:
• 1989: Veritas Software Corporation is formed to develop software utilities for AT&T Corp.'s Unix division.
• 1993: Veritas becomes a public company.
• 1996: Veritas acquires Advanced Computing Systems Corp.
• 1997: Veritas acquires OpenVision Technologies, Inc.
• 1999: Veritas completes its $1.6 billion acquisition of Seagate Software's Network and Storage Management Group.
• 2000: Oracle Corp.'s executive vice-president, Gary Bloom, joins Veritas as president and CEO.