Analysts Predict Future of TippingPoint

With 3Com announcing plans to file an IPO for TippingPoint, analysts see TippingPoint prospering on its own or getting acquired.

3Com officials are getting ready to file an IPO by the end of the year for TippingPoint Technologies, which 3Com bought in 2005. But just what will happen if TippingPoint steps out on its own in the crowded market for intrusion prevention systems remains to be seen.

Paul Proctor, an analyst at Gartner, said that TippingPoint, which is based in Austin, Texas, will likely be better off on its own because company officials can then focus on their enterprise capabilities without worrying about integrating with 3Coms products. Still, with many in the security industry predicting the next generation of firewalls will be tightly integrated with network firewalls, TippingPoint may not be on its own forever.

"Pure-play enterprise IPS is commoditizing," Proctor said. "We see the inevitable integration of functions into single boxes for enterprise use as well as services like IPS moving into the cloud offered by service providers. With those market dynamics, I think its likely that TippingPoint would be a consolidation target for a multifunction box vendor or one that services the provider market sometime in the next few years."

Nick Selby, an analyst at The 451 Group, said that despite constant questions about the effectiveness of IPS and IDS (intrusion detection systems), the IPS market is still strong and TippingPoint has a solid reputation in the space. The IPO of Sourcefire earlier this year was taken as a sign that the IPO is once again a viable exit strategy, Selby said.

"Sourcefires share price has recovered slightly and then stayed flat since a correction brought it down more than 35 percent," he said.

According to the plans announced June 28, 3Com, of Marlborough, Mass., intends to remain a majority TippingPoint shareholder following the IPO and will reduce its ownership over time in subsequent transactions.

"We believe this move will enable 3Com and TippingPoint to focus on their core strengths, target markets and strategic goals," Edgar Masri, 3Coms president and CEO, said in a statement. "The decision to IPO TippingPoint enables 3Com to focus more closely on its core business—delivering integrated secure, converged network infrastructure solutions to enterprises and increasing H3C sales worldwide."

Brenon Daly, also an analyst with The 451 Group, said, "3Com paid $425 million for the business, which has been kind of lost inside the company over the past year and a half—lost to Wall Street anyway. So, by spinning TippingPoint out, maybe they can get some visibility for the business."

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