During the week of Black Hat/Defcon, McAfee acquired MX Logic for about $140M plus incentives, adding additional email security and web filtering services to their product line. I had kind of forgotten about McAfee and email security, and not just because of the conferences. Seriously, they were almost an afterthought in this space. Despite their anti-virus being widely used in mail security products, and the vast customer base, their own email & web products have not been dominant. Because they’re one of the biggest security firms in the industry it’s difficult to discount their presence, but honestly, I thought McAfee would have made an acquisition last year because their email security offering was seriously lacking. In the same vein, MX Logic is not the first name that comes to mind with email security either, but not because of product quality issues – they simply focus on reselling through managed service providers and have not gotten the same degree of attention as many of the other vendors.
So what’s good about this? Going back to my post on acquisitions and strategy, this purchase is strategic in that it solidifies and modernizes McAfee’s own position in email and web filtering SaaS capabilities, but it also opens up new relationships with the MSPs. The acquisition gives McAfee a more enticing SaaS offering to complement their appliances, and should more naturally bundle with other web services and content filtering, reducing head-to-head competitive issues. The more I think about it, the more it looks like the managed service provider relationships are a big piece of the puzzle. McAfee just added 1,800 new channel partners, and has the opportunity to leverage those channels’ relationships into new accounts, who tend to hold sway over their customers’ buying decisions. And unlike Tumbleweed, which was purchased for a similar amount of $143M on falling revenues and no recognizable SaaS offering, this appears to be a much more compelling purchase that fits on several different levels.
I estimated McAfee’s revenue attributable to email security was in the $55M range for 2008, which was a guess on my part because I have trouble deciphering balance sheets, but backed up by another analyst as well as a former McAfee employee who said I was in the ballpark. If we add another $30M to $35M (optimistically) of revenue to that total, it puts McAfee a lot closer to the leaders in the space in terms of revenue and functionality. We can hypothesize about whether Websense or Proofpoint would have made a better choice, as both offer what I consider more mature and higher-quality products, but their higher revenue and larger installed bases would have cost significantly more, overlapping more with what McAfee already has in place. This accomplished some of the same goals for less money. All in all, this is a good deal for existing McAfee customers, fills in a big missing piece of their SaaS puzzle, and I am betting will help foster revenue growth in excess of the purchase price.