Symantec has once again flexed its wallet, and bought a spot in the data protection market. By acquiring PGP Corporation for $300MM and GuardianEdge for $70MM in cash, Symantec basically bought the marketshare lead in endpoint encryption. Whatever that means, since encryption is a number of different markets with distinct buying constituencies and market leaders. We estimate PGP got a multiple of around 4x bookings, and GuardianEdge got between 3-4x as well, which is pretty generous but not crazy like some of Symantec’s past deals (Vontu, MessageLabs).
So what is Symantec getting in the PGP acquisition? Good FDE. They are getting a well-designed key management product, as well as encryption tools that can be leveraged into the MessageLabs suite of email security tools. PGP also has a lot of desktop encryption customers, which will be a nice bundling option for the endpoint protection suites. While the core encryption technology and key management pieces are very good products, PGP has struggled on the management side. They have not done a very good job of listening to the market, or addressing ease of use and deployment concerns around Universal Server, especially at the enterprise level. The only thing universal about Universal is how much people hate it. They have been slow to develop mobile and cloud-based services, and their provisioning approach looks like a poor man’s DRM. Good parts, but poorly orchestrated. Looks like they’ll fit right in at Symantec.
GuardianEdge also has a good Full Disk Encryption (FDE) product, which Symantec has been providing via an OEM agreement. Clearly not having a FDE option was a big issue for Symantec, given their biggest competitors (McAfee, Sophos, & Check Point) have acquired market leading products and are increasingly bundling with the endpoint suite. It does beg the question: why acquire GuardianEdge as well? We surmise their decision was based on momentum and product strength. Symantec has been selling GuardianEdge for a while, and to have to migrate customers to PGP would be unpleasant. Additionally, GuardianEdge’s product is strong in the critical places where PGP is weak. They have a much better rights management console, and their endpoint management and smart phone infrastructure are each clearly a step ahead of PGP. On paper, the products from PGP and GuardianEdge are more synergistic than competitive.
Which brings us to the blind spot in these deals: strategy and integration. Symantec must now stitch pieces of technology from these two companies together, which will not be easy. It’s never simple, just from a technology perspective, but now Symantec has to reconcile three separate cultures. They will also also need to create an over-arching data protection strategy, including how DLP plays into the architecture. Strategy is not Symantec’s strong suit, but in order to really achieve leverage and earn back their investment, they must communicate a strong data protection strategy and then integrate the products to make it a reality. And there are mixed messages with the target audience: with mobile device support and policy management more tuned for corporate environments, how will these products work for Symantec’s government clients?
I think PGP was one of the first security tools I ever purchased. I have been using their email encryption product for over a dozen years, starting with version 5 way back in the mid-90s. PGP is as close to a household name as you get for encryption. It was always reliable, easy to use and secure. Their full disk encryption product – as a single-user product – was the best I have used. They have all the pieces you need for mobile device and data encryption, but have not executed as well as they should have. And as a Mac user, their crappy iPhone support and warning users OS X updates would destroy data – several days after the update was announced – were not at all cool. But those are all personal observations. As far as the market is concerned, encryption is just a tool for security. There are hundreds, of uses cases for encryption, but ultimately encryption needs to be embedded within applications, email clients, and the OS to have its full impact. Encryption as a standalone market opportunity? Not so much.
Which is why the deal makes sense on a number of levels. But as Symantec has proven over the past 5 years, having all the pieces doesn’t make it successful. Just having a giant freakin’ sales force is not enough. The onus is on them to actually execute on these deals. We’ll see if the new Enrique Salem regime will have better luck with making big deals work.