Best Of Breed 2014: Solution Providers Predict Who Might Be Next To Split

With Hewlett-Packard, Symantec and eBay all recently unveiling plans to split, solution providers this week were bubbling with speculation during the 2014 Best of Breed conference in Orlando, Fla. over which vendors could be next for a breakup.

The candidates ranged from McAfee to EMC to Xerox, all companies partners said could benefit from a spinoff. But some solution providers took a different route, suggesting the recent splits could spark an acquisition craze, as vendors scramble to compete, especially with a more nimble and agile HP.

Ray Stasieczko, VP at ImageQuest Technology, a Nashville, Tenn.-based managed service provider, said Xerox seems like a natural fit for a split, given its growing focus on services over the past several years. Stasieczko said he wouldn't be surprised by -- and would fully support – Xerox spinning off its printer and copier business to Global Imaging, the hardware-focused integrator it acquired in 2007, to double down instead on its services business, which has grown to account for nearly 60 percent of Xerox's overall revenue.

[Related: Whitman At BoB Conference: HP Split Will Allow Partners To Make More Money]

"I think Xerox has real potential to split, in order to really get a handle on the services side [of the business]," Stasieczko said. "Obviously, print is going down, and HP recognized that."

Stasieczko, who is also an HP partner, applauded CEO Meg Whitman's decision to spin off its print and PC business from its enterprise and services business and said Xerox could benefit from following suit.

"I think Meg was right on the money with that," Stasieczko said.

Gary Strom, territory manager at Dealflow Networks, a Suwanne, Ga.-based solution provider, named McAfee as a potential candidate for a split, pointing to the number of acquisitions the security vendor has made over the past few years.

McAfee scooped up network firewall vendor Stonesoft in 2013, along with Validedge, a provider of sandboxing technology. Strom said he could see either McAfee being spun off from parent company Intel, or potentially just splitting itself, possibly by isolating its Advanced Technology Group from other legacy parts of the company.

"McAfee, I think, could be a candidate [for a split]," Strom told CRN. "I wouldn't be shocked if something spun off from them. They've bought so many companies."

Strom also said there's a strong possibility for EMC to spin off VMware -- something activist investor Elliot Management has been pressing the storage giant to do -- and for Cisco to potentially divest its security business, which swelled significantly with the acquisition of Sourcefire last year.

In general, Strom said there can be a danger in a vendor becoming too large, or trying to do it all through acquisitions.

"You can't move as fast, and it can sometimes frustrate vendors and customers," Strom said.

<NEXT: Does An Acquisition Frenzy Loom?

Patrick Moorhead, principal analyst for Moor Insights and Strategy, echoed a similar sentiment in an interview with CRN prior to the Best of Breed conference.

"I think, either you get to a point where you are so large that you just have a hard time making key decisions and unlocking enterprise value, or the markets that different [business units] are going after are just so different that it's hard to unlock value because there is very little synergy," Moorhead said.

Microsoft, Moorhead said, could be another possible candidate for a split, given its focus on two completely separate market segments: the enterprise and consumers.

"Microsoft should seriously consider what they do here. I think it's very apparent that there are two forces playing against each other, and one is the commercial play and one is the consumer play. That is tripping them up all over the place," Moorhead said. "The product decisions and the strategy decisions that might be good for a consumer product are fundamentally the opposite of those that would be for a commercial product, [such as] timeframes, longevity, how quickly you bring in features and the channels."

"Microsoft also has the 'big' factor," Moorhead continued.

"They are so big that getting decisions to be made between their giant product groups is very difficult," he said. "There is a reason Microsoft [Windows Phone] has single-digit smartphone market share."

Some solution providers, meanwhile, said they don't expect the HP or Symantec split to necessarily trigger other companies to do the same. Instead, HP's new stand-alone enterprise group, which HP CEO Meg Whitman said will be bullish on acquisitions, might spark a buying frenzy, as other companies prepare to take on that group.

"You have HP's enterprise group that has $5 billion to $10 billion to go out and buy companies with. So the Citrix's and the CommVault's and the Veeam's -- these are all these companies in the data center space that could be targets," said Jed Ayres, CMO at MCPc, a Cleveland-based solution provider. "And when you see some of that happen, I think it could be a domino effect. When HP makes a move, then Cisco might make a move. I think that will be the more interesting thing to watch than who is next to split."

Moorhead agreed, predicting that the recent splits could, in fact, lead to a spike in M&As.

"I think these things die down pretty quickly," Moorhead said, when asked if he thought more splits were looming. "I think we might have two or three months of hand-wringing and then we reach a stasis point where Wall Street moves on to something new and different. It might very well be acquisitions, then splits, then acquisitions, then splits."

PUBLISHED OCT. 16, 2014