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What Symantec's acquisition of Blue Coat says about the CASB market

Symantec’s surprise announcement this week that it had agreed to acquire Blue Coat Systems for a whopping $4.65 billion in cash led to much discussion about how the purchase will affect the beleaguered antivirus giant, which has experienced well-documented struggles and setbacks in recent years. But there’s been much less focus on Blue Coat — how the company arrived at this point, and how much its investments in cloud security, specifically the cloud access security broker space, have benefited Blue Coat.

First, let’s go back in time and look at some numbers. During Blue Coat’s last full fiscal year as a public company (ended April 30th, 2011), the company posted was $487 million in revenue. In the announcement for its FY 2011 financials, then-CEO Mike Borman didn’t mince words about the disappointment around those results. “I am not satisfied with our revenue performance, as we did not deliver the top-line results that I believe we are capable of,” he said.

Later that year, private equity firm Thoma Bravo acquired Blue Coat for $1.3 billion. At that point, Blue Coat’s focus was on the WAN optimization market (Borman highlighted the company’s MACH5 technology and PacketShaper products as bright spots in the otherwise lackluster FY 2011 results) rather than cloud security. Fast forward to March of 2015, and Thoma Bravo sold Blue Coat to Bain Capital for $2.4 billion (Thoma Bravo reportedly had talks to sell the company to Raytheon the previous year).

Fast forward again to this month, and Bain sold Blue Coat for almost twice what it had paid for the company about a year earlier. So what changed over those 15 months? Blue Coat has obviously strengthened its presence in the web security gateway market in recent years (the company is routinely listed as a market leader by analyst firms such as Gartner and IDC). But the vendor also made some aggressive acquisitions of its own last year in the CASB market, starting with the purchase of Perspecsys, a startup based in McLean, Va., in July (terms of the deal were not disclosed). And just a few months later, Blue Coat acquired another CASB startup, paying $280 million for San Jose-based Elastica. And Blue Coat isn’t the only company getting in on the CASB market, as Microsoft bought Adallom for a reported $320 million.

Why did Blue Coat acquire two CASBs? As Blue Coat COO Michael Fey explained to SearchCloudSecurity last year, Elastica and Perspecsys had distinctly different approaches to the CASB model. Perspecsys offered patented tokenization technology to protect corporate data moving to and from cloud applications, while Elastica’s platform concentrates on SaaS monitoring and usage analysis. Blue Coat began integrating both CASB offerings with its web security gateway products under the company’s “Cloud Generation Gateway” strategy.

Both acquisitions appear to have benefited the company, which is now seen as a leader in the CASB space. Several analysts have applauded the move as a way to bolster Symantec’s presence in the cloud security market. Barron’s, for example, noted that while 80% of Blue Coat’s revenue comes from the slower-growing web security gateway market while the remaining 20% comes from the “more promising” CASB space.

It’s impossible to determine how much value the CASB deals have added to Blue Coat, as the company is privately held. But clearly Blue Coat has become a hotter commodity than it was when the company changed owners last year; it’s worth noting that less than two week before Symantec paid $4.65 billion for the company, Blue Coat announced plans for an IPO (according to Business Insider, the company filed its IPO plans under the JOBS Act, which allows smaller businesses to file for IPOs privately with the SEC). But Symantec — apparently sensing some urgency — snatched up Blue Coat before the IPO could take place.

Time will tell if the acquisition turns out to be a success, let alone the transformational move Symantec needs to move beyond its legacy antivirus business. For now, however, it looks like the CASB acquisitions were lucrative investments Blue Coat, and I’d expect interest in the market from IT vendors and enterprises alike to continue to grow.

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