Symantec Turns Down PC Maker’s Product Bundling Offer
Case Type: operations strategy; mergers and acquisitions.
Consulting Firm: Bain & Company first round job interview.
Industry Coverage: software, information technology (IT); computers.
Case Interview Question #00286: The client Symantec Corporation (NASDAQ: SYMC) is a manufacturer of security software for computers. Headquartered in Mountain View, California, Symantec is a Fortune 500 company and a member of the S&P 500 stock market index. Symantec offers shrink-wrapped security software application 
products and has grown over the last few years — mainly through multiple acquisitions. In the recent time, however, their stock price has declined significantly. The sales have declined but their customer service department has shown impressive growth in revenues over the last few months.
Recently, the CEO of Symantec has an offer from one of the largest personal computer OEMs (Original Equipment Manufacturers) in the country to bundle his software product with their PC products and he’s unable to decide what to do. You have been brought in to help him analyze the situation and charter the path ahead. What would you recommend?
Possible Answer:
Candidate: Before I begin analyzing the case, I would like to clarify a few aspects of the case.
Interviewer: Sure, go ahead.
Candidate: You mentioned that the sales have declined recently but the customer service revenues have shown significant growth. How significant has the decline in sales been? Also, does the company have other sources of revenue besides product sales and customer service?
Interviewer: The sales have not declined much but they have been stagnant amidst a growing sector. Customer service revenues have been increasing steadily over the last year or so, though. These are the only two sources of revenue for the company.
Candidate: I see. I would also like to understand the type of offer that OEMs have made. What is the revenue sharing model going to be?
Interviewer: The OEMs are desktop and laptop computer manufacturers who are offering a pre-installation of trial versions of the company’s software on some of their product lines. In return, the company will have to pay a fixed fee to the OEM for every new pre-installed computer sold and a 20% commission for every user who moves from the trial version and purchases a full version of the software.
Candidate: I understand. So, it appears to me that the OEMs’ proposal can help us expand our sales volume, though at lower margins. I am not sure whether this addresses the core issue that we are facing, so I’d like to analyze the current profitability situation of the company. As you mention, the customer service revenues have been rising. Do we have some data on the types of customer service incidents that are commonly seen here?
Interviewer: I do not have specific numbers on customer service requests. However, I can tell you that a major category of service requests are around software configuration issues. Sometimes the company’s software applications provide multiple ways to accomplish the same goals. A significant number of callers seek help on how to navigate different software.
Candidate: I see. One of the objectives of software design is to keep it simple and intuitive with in-built easy-to-use help. It appears to me that the company’s products could improve on this dimension. I suspect that some of this is the result of integrating technology from aggressive acquisitions that we have made in recent years. I see broadly three ways to integrate acquisitions. First, the company can simply add an acquired product as a new standalone offering in its product portfolio. Second, the new technology from acquired companies could be utilized to add new features to the existing products of the company. Third, existing products of the company could be replaced by superior acquired products. What approach has this company taken in integration?
Interviewer: That’s a good way to think about it. In this case, the company has primarily followed the first two approaches. There has been both a portfolio expansion as well as product enhancements.
Candidate: I suspect that the rising customer service revenues actually point to poor integration of the acquisitions. There are two separate aspects to a successful integration. First, the product portfolio has to be rationalized at a technical level. If the company offers multiple offers to accomplish the same goal, it tends to be confusing for the customer. Similarly, products need to have a consistent look and feel so that it is easy for customers to navigate and configure various features. Second, the sales and marketing team needs to be well trained about the company’s evolving product portfolio. They should be able to help customers make good choices for their needs.
Based on the type of customer service incidents, it appears that the company has not done very well on either front. Customers are finding it difficult to configure and navigate the company’s software products. Also, acquisitions should have led to an increase in sales. But stagnant sales point to deficient sales and marketing function. I think without addressing these integration issues, it will be futile to pursue the OEMs offer. It isn’t beneficial in medium and long-term to acquire disgruntled customers.
Interviewer: So what would your advice to the CEO be?
Candidate: I would recommend that the sales force be overhauled. There needs to be a strong mandatory training program for the sales staff to make them fully conversant with the company’s products. I’d also recommend that the redundancy in the product portfolio be reduced so as to alleviate customers’ confusion. A technical push should be launched to make the software look and feel consistent across products. This should improve customer satisfaction, drive repeat business and improve sales. As for the OEMs offer, I would advice to hold off until these core issues are addressed.
Interviewer: That seems fair. I think you have identified the main issues in the case and provided crisp recommendations. We’ll close here. Thank you.