After a tumultuous final month of 2006—which included a $90 million buyout of PortAuthority Technologies on the upside, and a disappointing fourth-quarter earnings report on the downside—Websense Chief Executive Gene Hodges says his company is ready to increase its presence with enterprise customers in 2007 based on its newly expanded collection of security filtering tools and channel partnerships.
Despite the fact that Websense missed its Q4 sales estimates, with the companys net income dropping by 30 percent compared to the same period in 2005, the addition of PortAuthority, a DLP (data loss prevention) technology specialist, and a new distribution deal with massive reseller Ingram Micro have the company better positioned than ever before to help companies deal with their most pressing security issues, Hodges said.
The CEO claims that the earnings shortfall was driven largely by startup costs associated with the new relationship with Ingram, which is based in Santa Ana, Calif., and recognized as one of the worlds largest distributors of IT products. The short-term expense of marketing Websense to all of Ingrams partners will pay dividends in the long run, however, he said.
And the addition of DLP technology—predicted by market watchers to be a hot item over the next 12 months—to San Diego-based Websenses existing portfolio of Web filtering products, said Hodges, arms the firm with exactly the right package of technologies to help enterprises meet their external and internal security scanning needs.
"We had a tough quarter, and this deal will prove to be either the smartest or stupidest thing we could have done, but we want to build a compact suite of products that solve companies biggest concerns about keeping threats off the network and having control over their sensitive data," Hodges said. "This suite doesnt need to extend as far in terms of footprint, as some other vendors may try to lead customers to believe, and with the addition of PortAuthority, we feel weve got all the pieces we need."
While security applications market leader Symantec and second-place rival McAfee are trying hard to "cover the entire waterfront," according to the CEO, Websense can attack the most significant pain points being experienced by enterprises today via the combination of DLP—which aims to keep sensitive corporate information from being misused or misappropriated—with the companys existing filtering technologies, which cover everything from malware defense to Web applications control.
Enterprises may be looking for fewer security vendors to deal with, and more integrated packages of technologies—for purposes of both simplicity and more effective threat mitigation, but customers are not buying into the larger providers strategies because their products remain less tightly knit than they claim, Hodges said.
And while the bigger players and security newcomer Microsoft will engage in price wars that cut away at their own profitability, companies such as Websense that can address large clusters of problems for customers in an intelligent fashion will be able to keep their own pricing at a more practical level.
"The breadth of Symantecs product line is so large that theyre going to end up trashing their own pricing structure, its hard to make a big profit if youre giving products away for five dollars per user, and Microsoft will certainly trash price points in the areas they are in," he said. "Well bring a specific set of device and network-centric technologies to people that can help them block the most serious threats to their operations and data; we know thats what customers are actually asking for."
Having completed the PortAuthority deal in less than three weeks, and integrated many of the companys products with Websenses existing technologies in the past month, Hodges says Websense is already beginning to flex its expanded sales force, and the massive channel brought to it via the Ingram deal. The next year will be crucial for further establishing the company as a leader in the markets it competes in, he said.
Industry watchers appear to be convinced that Websense does have a chance to grow its business, even in light of fierce competition from larger vendors and smaller point-technology providers. Paul Stamp, analyst with Cambridge, Mass.-based Forrester Research said Websense has put together a compelling package of security products.
"Content security has always been about stopping bad things from coming in, but now with compliance and protection of intellectual property on customers minds, the game has changed to wanting to know whats going out as well," Stamp said. "A solution that can give you insight into both will be really well accepted in the market, which serves well from a Websense point of view."
One of the factors that could drive Websenses success in convincing enterprise organizations to buy into its vision will be the firms ability to help users create and manage new business processes that aid their efforts across both security and compliance, Stamp said.
In terms of competing for business with Symantec and McAfee, the analyst observed that Hodges pitch of a compact suite might find some willing recipients. The massive scope of the other vendors product lineups may appeal to some firms, but most customers are still looking for the best packages of technology they can find, versus concerning themselves with moving to one single outlet.
The analyst said he also likes the companys move to partner with networking gear maker Crossbeam, through which Websense filtering technologies are being embedded on its partners switches, as he believes customers are looking for that type of integrated security.
Stamp believes that Websense will still compete more directly with companies such as network defense specialists Secure Computing, and that it could stand to bring onboard additional messaging security technologies, but the analyst believes that Hodges has moved the firm into a stronger position to move forward with the moves hes made of late.
"The problem Websense has had over the last several years is that their products were becoming commoditized, and theyve come under increasing pressure from endpoint security vendors and gateway security providers," Stamp said.
"The compact suite approach has some merits; I dont know any company that buys all of its security technologies from one organization, and the question among CIOs is when does a suite become too much of a behemoth; Websense is managing to provide suite-based functionality, but not trying to do the whole thing from end-to-end."
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