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Dealtime 2010: Remembering the Departed

Mike Rothman December 23, 2010 No Comments

As we approach Christmas time, quite a few folks will have gold bullion under their trees, courtesy of the security industry M&A machines. Of course, the investment bankers and lawyers had a banner year, but let’s also hear it for some fortunate entrepreneurs, their VCs, and even some public company shareholders who were able to share in the wealth this year. You forget how long 12 months are, until you go back and start to revisit what happened in 2010. CRN helped me out a bit by doing one of their silly slideshows (page view hos) listing the Top 10 deals in security this year. Let’s take a quick run through each and think about the longer term impact (though we covered many of these during the year). Intel/McAfee: Obviously having the biggest pure-play security company taken out is a big deal. We did some analysis of the deal (and here), and our perspectives haven’t changed. Though with the EU scrutinizing the deal, there is still some risk of not closing. If it does we expect business as usual, though McAfee may be a bit more acquisitive (and spend bigger $$’s) leveraging Intel’s balance sheet. Symantec/PGP/GuardianEdge: Symantec had a huge hole relative to encryption, and they filled it. Twice. Why buy one, when you can buy two at twice the price? It’s the SYMC way! Though the initial integration ideas we’ve seen on the roadmap are promising, we are still talking about the Big Yellow here, so we remain cautious. Here is our deal analysis. Symantec/VeriSign: This high dollar deal was a surprise and clearly there is lots of risk. It does make sense and provide some leverage, especially relative to the enterprise authentication business. And this one requires less integration than most of SYMC’s deals. So this could end up being a net positive if the SYMC field teams can figure out how to sell it. SonicWall goes private: Thoma Bravo acquired SonicWall (our analysis here) and saved them from the quarterly scrutiny of being a public company. Big whoop. The real question is what are they going to fold into the operation (and no, Entrust is not a clean fit), because the company will need some additional heft and excitement to warrant another public offering or higher value deal to a strategic acquirer. Sophos goes private equity: Despite how ineffective traditional AV is at pretty much everything (except maybe passing PCI), it’s still a multi-billion-dollar market. We were reminded of that when APAX partners acquired Sophos for $830 million. Basically a 2nd tier player in AV is bigger than the entire DLP market, though probably not for long (WIKILEAKS WIKILEAKS WIKILEAKS). Like SonicWall, Sophos will need to keep buying stuff to be able to generate excitement for an IPO. HP/Fortify: HP got the application security bug and added Fortify to SPI Dynamics and folded it all into its application tools business. Which is exactly where it belongs, because without tight linkages to IDEs and dev tools, developers won’t do much. Not that they will even with tight integration, but at least there is a chance. This also showed HP’s need to buy the biggest dog in any space, because you cannot move a needle that weighs more than $120 billion, $10 million at a time. HP/ArcSight: HP also swallowed up the big dog of the SIEM space in 2010. We’ve been saying for a long time that SIEM and Log Management are going to be part of the big IT ops management stack, and this kind of move facilitates that. Of course integration won’t be easy, but in the meantime we’re pretty sure an army of EDS services folks will keep very busy making ArcSight work. McAfee/Trust Digital: McAfee did a few deals last year, and this one – acquiring Trust Digital to add some mobile security technology – may pay dividends when we see weaponized mobile attacks go mainstream. At some point it will happen and folks will have to pay attention to what’s on those pesky smart phones and how to protect it all. IBM/BigFix: After screwing the pooch on the ISS deal, IBM went back to the well to acquire BigFix, which is as much a big IT ops play as a security play. It fits nicely with Tivoli and thus will be a lot cleaner to integrate and leverage than ISS. That doesn’t mean there won’t be a run for the exits by the BigFix brain trust, or that IBM won’t screw this one up too, but you can at least make a case that BigFix is a much better fit. Trend Micro/Mobile Armor: Oh, yeah, Trend had a big hole in mobile encryption as well. So they filled it, but only once. How silly. Though it’s not clear they could have filled it twice if they tried. Bonus Round The CRN folks left out a couple that bear mentioning. RSA/Archer: This deal was announced on Jan 5, so it hardly feels like a 2010 deal. Given EMC’s move to drive more of their own services and push to solidify CIO level relationships, buying Archer’s toolkit, I mean ‘platform’, makes a lot of sense. The question for next year is whether RSA will buy something to supplement EnVision, which continues to fall behind technically in the SIEM/Log Management space. Juniper/Altor: This one is fresh in our minds because it went down recently, but buying Altor was probably as much about Juniper getting access to the VMSafe API as about buying a spot in a market that isn’t yet. How else do you justify paying in the neighborhood of 30x bookings? You can check out our pithy Incite on the deal (it’s bullet #3). I’m sure by this point you want to know what’s going to happen in 2011. So let’s bust out the Magic 8 Ball and figure it out: Will there be more deals in 2011 than 2010? My sources say no. Will there be a bunch of fire sales? Without a doubt.

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