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Starboard Seeks Five Board Seats at Symantec

Cara Lombardo
FILE PHOTO: The Symantec logo is pictured on a screen June 13, 2016. REUTERS/Thomas White/Illustration/File Photo GLOBAL BUSINESS WEEK AHEAD SEARCH GLOBAL BUSINESS 30 OCT FOR ALL IMAGES

Symantec Corp., which makes antivirus software that alerts millions of people to risks lurking on their computers, is now facing a potential threat of its own.

Activist investor Starboard Value LP has taken a position in the cybersecurity company and privately nominated five directors to its 11-person board in July, according to people familiar with the matter.

The hedge fund helmed by Jeff Smith beneficially owns about 5.8% of Symantec, making its stake worth about $670 million, the people said. Starboard thinks Symantec, shares of which have plunged 34% this year, needs operational changes to improve margins, especially in its business-facing segment, the people said.

The Silicon Valley company’s market value has dropped to around $11.5 billion from as much as $21 billion about a year ago, according to S&P Global Market Intelligence. The biggest one-day stock price drop over that period, 33%, came May 11, a day after the company announced its board was conducting an internal audit on unspecified financial issues raised by a whistleblower. The company has since said it doesn’t expect a material adverse impact on past financial statements.

Starboard believes its board nominees could help remediate any financial-reporting issues and improve operations, much like it recently did at Marvell Technology Group Ltd., the people said. Its proposed slate includes a former chairman of antivirus company AVG Technologies, a former Intuit Inc. executive and three people it put on Marvell’s board, including Starboard research head Peter Feld.

Symantec also warned this month it isn’t closing as many deals as expected in its enterprise security unit, which sells to businesses and makes up about 60% of its revenue. Its consumer unit, whose brands include Norton and LifeLock, is faring better. Chief Executive Gregory Clark said at the time that the company is focused on underperforming areas and has invested in its sales operations.

A spokeswoman for Symantec didn’t immediately respond to a request for comment Wednesday.

Symantec spent about $7 billion in recent years on two high-profile acquisitions—cloud-security company Blue Coat and identity-theft-protection company LifeLock—that were met with enthusiasm from investors. But those deals have done little to jump-start growth at Symantec, which Starboard believes lags its peers despite it being one of the largest cybersecurity companies, the people said.

Starboard, a New York hedge fund best known for replacing the entire board at the parent company of Olive Garden in 2014, has taken stakes in several other technology and software companies.

Symantec has attracted attention from activists before. Heavyweight Elliott Management Corp. was one of its largest shareholders in 2016 and applauded when private-equity firm Silver Lake made a $500 million investment in a bid to boost the company’s flagging stock. Silver Lake doubled down its investment at the time of the Blue Coat deal. Fellow private-equity firm Bain Capital has also invested in Symantec, and both Bain and Silver Lake have representation on Symantec’s board.

Robert McMillan contributed to this article.

Write to Cara Lombardo at cara.lombardo@wsj.com



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