McAfee to acquire Secure Computing

McAfee announces its intention to acquire Web and network security company Secure Computing for $465 million.

A big fish is being swallowed by an even bigger one as McAfee Inc., announced today its intent to Secure Computing Corp., in a $465 million cash deal.

While the two companies have competed in many of the same security markets, Secure Computing extends McAfee's network security portfolio with its firewall products, as well as its stature in the email and Web gateway security markets. Secure Computing became a major player in email security when it acquired CipherTrust in 2006.

Above all, Secure Computing brings a big customer base--the two have a combined 125,000 customers, and 14,000 partners--and hefty revenue. The deal is expected to close in the fourth quarter, pending shareholder and regulatory approval.

"Today's announcement of this pending acquisition is a natural extension of McAfee's security-only focus," said Dave DeWalt, chief executive officer and president of McAfee, in a prepared statement. "We expect the pending combination of McAfee and Secure Computing will create an annual projected combined revenue of just under $500 million in the network security segment of our [security and risk management] portfolio. We believe that this pending acquisition will allow us to immediately establish a leading and highly competitive position in the network security space."

Atri Chatterjee, Secure Computing's vice president of marketing, said the two companies' product lines are complementary. Secure Computing has three basic lines: network, Web and messaging security. Secure Computing, for its part, lacked any presence on the desktop, where McAfee is strong in antimalware, intrusion prevention and data protection. Secure Computing CEO Dan Ryan will run McAfee's network security operation, Chatterjee said.

Chatterjee sees real opportunity for the companies, differences in market focus notwithstanding, to combine technological expertise.

"Secure Computing has its global reputation filtering for messaging and Web security, Trusted Source, and McAfee has Avert Labs for antimalware," he said, "There's opportunity for some real synergy in those areas. For example we can extend reputation to intrusion prevention and firewalls."

Secure Computing, it would seem, has been prepping itself for this move. Two weeks ago, it shed its SafeWord product line of identity and access tokens to Aladdin Knowledge Systems, while scooping up Securify, a maker of identity-based network monitoring appliances.

"Obviously, SafeWord is less interesting to McAfee; it would make sense they'd throw off a business unit McAfee is not interested in," said Paul Roberts, senior analyst with the 451 Group.

While there is some overlap in product lines, Roberts speculates McAfee could make good use of the reputation filtering engine that Secure Computing acquired in August 2006 from CipherTrust and its IronMail email appliances. Roberts said McAfee could also choose to use the intelligence aggregated by IronMail across its product portfolio. The Securify acquisition, meanwhile, brings McAfee the ability to do anomaly detection and offer network visibility that it previously lacked.

Charlotte Dunlap, senior analyst at Enterprise Strategy Group, said McAfee had been working to build its secure messaging technology through acquisition. "This rounds out their offerings very nicely," she said. "Overnight it makes them a secure messaging leader and buys them a lot of market share."

The deal will help drive McAfee's business in the enterprise and ISP markets, she said. "It gives them one of the top two leading reputation services and most important, strong Web security technology and intelligence," she added.

"The big question is which pieces McAfee is really going to embrace, and which are they going to be less interested in," Roberts said. "Even stuff they've acquired recently (Reconnex, SafeBoot and ScanAlert among others), we've been wondering how they're going to fit all of that together. And now they've bought more technology. It's going to be thorny going forward."

In the end, Roberts said he wasn't surprised that Secure Computing was purchased, adding that the integration of CipherTrust, for example hasn't contributed the $80 million to the top line as expected.

"It ended up doing about half that," Roberts said.

Chatterjee said that Secure Computing, as one of the leading network security vendors, along with Cisco Systems, Check Point, Juniper Networks and McAfee, was at a point where extending its market reach through merger made sense.

"Secure Computing is a mid-sized company; we don't have the range and reach of McAfee," said Chatterjee.

Michael S. Mimoso, editor of Information Security magazine, and Marcia Savage, features editor, contributed to this report.

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