Security Vendors Seek More

The security market is securing its growth with more and more buyouts.

The recent flurry of acquisitions may be just the opening rumbles of a major shake-up that could change the face of the security industry this year.

The market has been growing at a steady rate for several years, during which time there also has been a tremendous amount of innovation in products and services. But recently that growth seems to have plateaued, and companies have begun seeking acquisition targets to help sustain revenue growth or potential buyers to snatch them from the crowd.

"Last year, everyone was running out of money. This year, not only are companies faltering and the technology is still there, but companies get a better price now," said Pete Lindstrom, an analyst at Spire Security LLC, in Malvern, Pa. "Theres great technology out there in smaller companies, too."

Securing Growth

Recent acquisitions in the security industry:

  • December 2003 Netegrity buys Business Layers for $42 million
  • December 2003 VeriSign buys Guardent for $140 million
  • December 2003 Check Point Software Technologies Ltd. acquires Zone Labs Inc. for $205 million
  • November 2003 Sun Microsystems Inc. acquires Waveset Technologies Inc. (price undisclosed)
  • October 2003 Blue Coat Systems Inc. acquires Ositis Software Inc. for $1 million

Last months acquisition of Guardent Inc. by VeriSign Inc. for $140 million, and Netegrity Inc.s purchase of Business Layers Inc. for $42 million, while certainly not blockbuster deals, underscore the notion that there are a wide variety of companies looking for partners. Both deals create combined companies that become leaders in their respective market segments.

Executives involved in the purchases said numerous factors are driving acquisitions. "From an M&A perspective, tech stocks have done well recently, and the companies are fairly valued right now," said Deepak Taneja, chief technology officer of Netegrity, based in Waltham, Mass. "Buyers have been out looking for a while, but the sellers now feel they can get fair value for their assets. And customers want to buy from a single vendor, which is driving the large companies to make acquisitions. This makes it harder for providers of point products to survive."

There are a number of large security companies—including Symantec Corp., Network Associates Inc. and RSA Security Inc.—with available cash and designs on broadening their product lines. NAI made two large acquisitions in IntruVert Networks Inc. and Entercept Security Technologies last year, and NAI executives have said they are still on the lookout for other companies that complement NAIs product portfolio. Likewise, Symantec never has been hesitant to make acquisitions. RSA has been quiet, although sources say the Bedford, Mass., company has been looking into at least one potential acquisition in recent weeks.

"We ... have our eyes open [for more acquisitions]," said Taneja. "There are definitely pieces we dont own yet."