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Tumbleweed merger seen as a negative for email security customers

Email security vendor Tumbleweed will merge with Axway, in a deal that one analyst calls a death knell for the vendor.

Email security vendor Tumbleweed is merging with business-to-business (B2B) communications services vendor Axway in a deal that would integrate Tumbleweed's outbound email technologies into Axway's EDI network-based managed file transfer software.

I don't think anybody's going to revolt or react in a negative manner because it's in line with what the market has been telling us.
Joe Fisher,
executive vice president of product managementTumbleweed Inc. 

Axway, based in Scottsdale, Ariz., is a subsidiary of French-based Sopra Group, SA. It sells EDI network-based software and services aimed at specific industries. The company has a large number of German customers. Last year, Axway acquired Atos Origin, a German B2B software unit based in Germany.

Redwood City, Calif.-based Tumbleweed expanded its email security product line in 2004. The company sells several appliances including an email firewall and antispam and antivirus appliances.

Tumbleweed also sells a Secure Transport Server, which provides management of secure data transfer over FTP and other protocols. The appliance supports data transfer of EDI transactions, financial data and other large files over the Internet and private IP networks. Tumbleweed says the server eliminates the need for VPNs, leased lines, and non-secure FTP.

Frank Kenney, a research director at Stamford, Conn.-based Gartner Inc., who specializes in the managed file transfer market, said the move would help Axway expand its business into the midmarket. Axway currently competes with Sterling Commerce's Connect:Direct file transfer software. Kenney said the merger gives Tumbeweed customers the ability to step up to Axway's more robust secure managed file transfer offerings.

"This is not a technology buy," Kenney said. "They bought brand and bought midmarket share and new sales channels."

Kenney said it remains to be seen if Axway can execute on the merger with Tumbleweed. The company acquired Cyclone Commerce in 2005 and didn't leverage the brand very well, he said.

"They have the policy and filtering capabilities that would enhance our offerings," Dave Bennett, Axway's chief technology officer said of Tumbleweed. "Focusing on the appliances for certain markets is a powerful tool we'd like to leverage with some of our components."

This is not a technology buy. They bought brand and bought midmarket share and new sales channels.
Frank Kenney,
research directorGartner Inc.

The merger is expected to be completed by the third quarter of 2008. Tumbleweed's core products would be integrated with Axway's portfolio. So far the company has no plans to spin off any part of Tumbleweed's business, Bennett said. Tumbleweed will remain in Redwood City and there are no initial plans to lay off any employees, he said.

"We want the whole business and we want to grow in North America," Bennett said.

Peter Firstbrook, a research director at Gartner who focuses on the email security market, called the acquisition a "death knell" for Tumbleweed. Firstbrook said Tumbleweed has been steadily losing market share in its email security business. IronPort, which was acquired last year by Cisco Systems Inc., Symantec, Proofpoint Inc. and others will go after current Tumbleweed customers with incentives to lure them away, he said.

"From my perspective in the email market it's a negative," Firstbrook said. "We think that Sopra bought them so they can sell off the email business and keep the Tumbleweed brand and use it for their services and appliance business for FTP."

Firstbrook called the email security market saturated and said a lot of buying trends are consolidating around major players, such as Cisco-IronPort, Google, Symantec, Trend Micro and Microsoft. Functionality, such as data leakage prevention, encryption, antispam, antivirus, and email routing and management are converging to an appliance or services based platform, Firstbrook said.

Joe Fisher, executive vice president of product management of Tumbleweed called the inbound email security market extremely competitive and very commoditized. Gartner has called the vendor's antispam capabilities weak and said the vendor faced tough competition in the email encryption space. Fisher said inbound email security has not been the anchor of Tumbleweed's strategy over the last 18 months. Tumbleweed has refocused its strategy on secure outbound delivery and managed file transfers, he said.

"We have an opportunity to bring our customers a broader solution set and more products to solve a broader set of business problems that they currently have," Fisher said. "I don't think anybody's going to revolt or react in a negative manner because it's in line with what the market has been telling us."

Tumbleweed is known for its Secure Messenger encryption software. The product inspects all outbound email at the network gateway, identifies email content that is in violation of security policies, and automatically redirects suspect messages to a secure, encrypted channel for further action, such as deletion, quarantine, or encrypted delivery.

IronPort was one of Tumbleweed's chief competitors, according to a report issued by Gartner. It also competes with ZixCorp, a niche encryption vendor primarily in the healthcare industry, in addition to Secure Computing, PGP Corp., and Voltage Security.

Gartner called Tumbleweed's encryption technology very rich and said it supports all deployment options, such as push/pull, gateway, staging server, TLS, and desktop deployments. It also supports encryption of larger file transfers of 100GB or more, Gartner said.

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