Consolidation in security sector

Symantec’s acquisition of Brightmail in May is being viewed by analysts as a canny move by the security software giant. But anti-spam software market leader Brightmail commanded a premium price. Symantec paid $370 million – 14 times Brightmail’s annual revenues of around $26 million in 2003 and well above what Brightmail could have expected to bank from the initial public offering it had already registered for.

The two companies already had close ties: Brightmail’s CEO is a former Symantec executive and the company currently bundles some Symantec antivirus software with its products. Moreover, Symantec had built an 11% stake in the company and taken a seat on its board.

But the real plus for Symantec will come from the grafting on of Brightmail’s customer base. With 48% of its business derived from consumer products, Symantec is pushing hard to grow the proportion of its business that comes from enterprise customers. Brightmail software is used by 10% of the Fortune 500 and is considered to be the market leader in corporate anti-spam.

In product terms, Brightmail brings its Reputation Service, which blocks identified spammers, and Anti-Fraud, which protects against fraudulent ‘phishing’ emails. But Gartner analysts suggest that the grafting on of such tools to Symantec’s antivirus product bundles could result in Brightmail losing its ‘best of breed’ status, making the deal rather better for Symantec’s revenues than for Brightmail’s customers.

Spam continues to be a major headache for businesses, so it is surprising that Symantec and other major security firms had not made email filtering acquisitions sooner.

But others are beginning to follow suit. Identity management vendor Entrust last month acquired AmikaNow!‘s email content scanning and analysis technology. Terms were not disclosed but it is believed the deal is worth over $1 million, just above AmikaNow!’s total annual revenues. The six-year-old start-up’s scanning technology is distinctive for going beyond the usual word identification, using contextual analysis and artificial intelligence. Entrust intends to absorb the technology into its own Secure Messaging and Secure Data offerings by the end of 2004, as well as offering it as a stand-alone but Entrust-branded product.

Meanwhile, security and infrastructure services heavyweight Verisign continued to push into the wireless market with the acquisition of Jamba!, a German mobile billing and content provider, for $273 million in cash and stock – nearly double Jamba!’s expected revenues of $140 million. Wireless security is an obvious growth area for Verisign, and with Jamba!’s library of graphics, games and ringtones Verisign is now staking its claim in the wireless content market.

Key industry acquisitions in May
Acquirer   Activity   HQ   Target   Activity   HQ   Price  
Answerthink IT consulting US EzCommerce Global Solns ERP s/w implementation &dev India n/a
BAE Systems Defence &aerospace s/w UK STI Government Systems IT &imaging s/w US $27m
Ciber Systems integration US Ascent Technology CRM s/w &SAP/Sage solns UK $40m
Click Commerce B2B trading s/w &svcs US bTrade B2B trading s/w US n/a
DoubleClick Internet advertising s/w US Performics Search engine mktg s/w US $65m
Entrust ID and access mgmt s/w US AmikaNow! Email scan &anti-spam s/w US n/a
Exact Software Business applications s/w Holland Treadstone Group IT consultancy US n/a
Hewlett Packard Systems, s/w &services US ManageOne IT service mgmt training/consult US n/a
Hewlett-Packard Systems, s/w &services US CEC Europe Service Mgmt IT service mgmt training/consult UK n/a
Lucent Technologies Networking equipment US Telica VolP equipment US $295m
Mapics Manufacturing s/w US Magik! Product lifecycle mgmt s/w US n/a
Mercury Interactive Applns optimisation s/w US Appilog Appln mapping s/w US $49m
Mgmt/investment group US Sage’s AccountMate S/w unit Accounting s/w US n/a
NaviSite Managed applns services US Surebridge Application service provider US $39.5m
Openwave Systems Communications s/w &svcs US Magic4 Mobile messaging s/w US $82.6m
QAD Manufacturing s/w US Oxford Consulting EDI soln design &implementation US n/a
Sopra Group T services Fr Valoris IT services Fr n/a
Symantec Security s/w US Brightmail Anti-spam s/w &svcs US $370m
Tandberg ASA Videoconferencing solns Norway Ridgeway Systems &Software IP-based voice &video s/w UK $16m
Tata Consultancy Svcs IT services India Phoenix Global Solutions Insurance industry tech services India/US n/a
Verisign IT security s/w &svcs US Jamba! Wireless content svcs German $273m

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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