No Brainer: Veritas Buys KVS

Veritas Software Corp. (Nasdaq: VRTS) has announced today that it will pay $225 million to fill in a hole in its product line by picking up private U.K.-based email archiver KVS Inc (see Veritas Buys KVS).

The move continues two trends over the past 14 months: Veritas has consistently opened its checkbook to enhance its product line, and email archiving companies have been frequent targets in mergers and acquisitions (see Veritas Buys More Utility Power and Spam Blocker Chomps Email Archiver). Veritas expects the deal to close by the end of September.

Veritas CEO Gary Bloom says his company identified privately held KVS as the market leader in email archiving, pointing to its $23 million in revenue in 2003. He also pointed to rapid growth in that market, due to companies needing to retain email to comply with federal regulations. Analysts say KVS is on pace to record 2004 income as high as $45 million to $50 million. KVS claims more than 900 customers and 1.7 million seats worldwide and is entrenched in the Microsoft Exchange environment. Exchange is by far the most installed email program.

Veritas will run KVS as a business unit, and Bloom says its 200 employees will be retained in the U.K. under current CEO Mike Hedger. Enterprise Vault, KVSs flagship product, will be rebranded as Veritas Enterprise Vault beginning next year. Enterprise Vault will replace Veritas' Data Lifecycle Manager archiving product, and will eventually become part of Veritas' data protection suite.

It’s been no secret that Veritas has had problems with Data Lifecycle Manager (see Veritas Manages Data Lifecycles). The product was late and lacks the features of KVS and EMC Corp.'s (NYSE: EMC) Legato archiving software. Last month, an analyst told Byte and Switch , “If Veritas has half a brain, they’ll buy KVS right now.” (See Another Reason to Hate Compliance.)