by Tom Foremski for SiliconValleyWatcher.com

Many leading Wall Street analysts have supported the deal but there are serious short-term risks. (I discussed some of them a few weeks ago here: "Symantec's bid for Veritas risks damaging distraction to both at a critical time.")

Tom Berquist at Smith Barney points out some of the risks in his most recent research note, in which he reports on an analyst meeting with the two companies held earlier this week in New York.

He writes that there was little new information....

The companies instead focused mostly on continuing to educate investors on the rationale for the move, reiterating the vision for consolidating security, storage, and systems management into a single solution for ensuring "information integrity." The companies presented a number of new quotes from both partners and customers indicating that the response to this vision has been positive and continued to make clear the fact that this is a story about product (and revenue) synergy rather than consolidation. Investor questions focused mainly on details on the longer-term strategy and also on the cost savings (or lack thereof) that will initially result from the deal. The company indicated that the $100M in cost savings (approx. 4% of combined expenses) will come mostly from back-office consolidations and economies of scale rather than headcount reductions, again underscoring the companies' conviction about the top-line benefits of the merger over the potential nearer-term savings in the cost structure.

We continue to believe that the merger has long-term strategic advantages, with but that the lack of near-term top- or bottom-line synergies apparent in guidance, re-focused attention on concerns about AV growth, and integration challenges inherent in combining two software companies of this size will limit near-term upside.

Did you notice the line that the two companies "continued to make clear the fact that this is a story about product (and revenue) synergy rather than consolidation"?

So what is the deal about if it's not consolidation, a la Larry Ellison's brave new software world? I see hardly anything in terms of product synergy, and what the heck is revenue synergy? More revenue is synergistic with more revenue I guess.

John Thompson is a very effective leader and an ambitious man. If he succeeds, he will make history as accomplishing the largest ever software merger. And he will be a fantastic example of an African-American CEO of a large technology company.

During an interview last year I asked Mr Thompson if he thinks about his ethnic background much. He said no--to the extent that he can be an example to others, that's great.

But his office is full of Tiger Woods pictures and related golfing memorabilia, so it would seem that race is important. And I know from 20 years of living here, that most Americans are highly aware of their ethnic heritage and those of others--this must add to Mr Thompson's pressure to make this deal a shining success.

From BlackEngineer.com: '50 Most Important Blacks in Technology' Announced for 2005

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