So did anyone else catch what Symantec said about its Clearwell business on its quarterly conference call a couple of weeks ago? On that call Symantec revealed that for the first quarter of 2012 Clearwell business generated $13 million of revenue and that they expected about the same amount in the second quarter. It was a passing comment at best for the goliath of a company, but at AccessData we heard it as though it was blasted from a megaphone. It isn’t that $13 million is a meaningless amount of money, but from what we know it’s either down year over year or at best flat based on the disclosed trailing 12 month pre-merger revenue of $56 million. For a company like Symantec to have been unable to grow revenue in a relatively fast growth space says loads to me about the success of the merger and their commitment to the e-discovery market.
One year ago, at the time of the merger every pundit, myself included, postulated that what Symantec was really buying was a differentiator in the records management market and that they weren’t truly that interested in the e-discovery space. Most of us thought that simply because of the relative sizes of the two markets, with the e-discovery market being a small fraction of records management. The logic was that Symantec would integrate Clearwell into their Enterprise Vault product and then sell it – or even give it away – as differentiator. If they were able to increase their records management market share by even a few percentage points as a result, they would show huge gains in overall revenue. The problem I saw with this strategy was that it meant the pure play e-discovery customers like those in legal departments, services providers and smaller corporations that don’t have Symantec’s Enterprise vault product were likely to get left out in the cold.
A year later as an outsider looking in and based on the disclosed revenue and what we have seen in the market, it appears that those postulations were on the money. From what we can tell, Symantec continues down the path of integrating Clearwell into Enterprise Vault and they don’t appear to have done much new with Discovery Accelerator, so one has to assume they are looking to move away from that product. In addition, while we continue to see them at all the e-discovery shows, based on apparent lack of revenue growth, they really don’t appear to be putting much focus on the pure e-discovery market. At the same time, the pure play e-discovery market is clearly growing rapidly. At AccessData we saw strong growth in 2011 and the public disclosures of most of our competition also seem to suggest the market is growing at or above 20% annually. Given that type of growth combined with Symantec’s resources and one would have thought that with a little focus they could have delivered impressive results.
Another interesting data point that is worth noting is the departure of several of Clearwell’s executives including Aaref Hilaly. The exit of the executive team of any acquired company should not come as a surprise to anyone, it is so common that it is in fact the expected outcome. However, in this case, I think the departure of Aaref Hilaly and others around him is of particular note. Prior to the acquisition Symantec really didn’t have any play in the e-discovery market other than generic security and – whether you are a fan of Aaref Hilaly or not – it is simply a fact that Clearwell was an innovative company that paved the way in the development of e-discovery analytics. If the purpose of the acquisition was to give Symantec access to that market and to continue Clearwell’s success, then Symantec really needed to retain Hilaly and his team. And their relativiely quick departure seems to indicate dominance in the e-discovery market was not Symantec’s primary aim.
The absence of market success and the departure of some of Clearwell’s original leaders speaks volumes about where the division sits and what we can expect from it in the quarters to come. A multi-billion dollar software behemoth doesn’t waste cycles on a $10 million a quarter product line that isn’t growing. Frankly that is the profile of a business they divest or shut down, though I don’t think either action would be politically viable. That said, I think those of us deep in the e-discovery market can breathe a collective sigh of relief. It does not appear as though Symantec is going to eat anyone’s lunch anytime soon. We are far from out of the woods and it would be foolish to pass any final judgments until we see the ultimate Clearwell/Enterprise Vault integration, but the prospect of Symantec simply leveraging their massive channel to distribute the Clearwell technology far and wide in an e-discovery land-grab looks less and less likely.