Sophos and its private equity backers made good on promises to invest in the expansion of the security software business through today’s acquisition of unified threat management appliance vendor Astaro. Sophos says the acquisition is a response to customer demands for more complete security solutions, but it could also be seen as Sophos’ need to expand its footprint to remain competitive with the likes of Kaspersky Lab, Trend Micro and Symantec.
Through the acquisition of Astaro, the traditional software security company will adopt a hardware line for the first time. It will also provide Sophos with a robust line of UTM hardware products such as the Astaro Security Gateway line of appliances.
Why Astaro? It’s an attractive company that probably had a good price tag. The terms of the deal were not disclosed, but Astaro reported booked more than $50 million in gross revenue in 2010. It’s arguably the fourth largest UTM vendor, falling behind Fortinet, SonicWall and Watchguard Technologies. According to Sophos, Astaro has more than 56,000 product installations in 60 countries.
“Our strategy is to provide complete data and threat protection for IT, regardless of device type, user location, or network boundaries. Today, we offer solutions for endpoint security, data protection, and email and web security gateways. The combination of Sophos and Astaro can deliver a next generation set of endpoint and network security solutions to better meet growing customer needs,” Sophos wrote in a FAQ on the acquisition.
Sophos has been looking at expansion opportunities since it was bought by Apax Partners, a European private equity firm, for $830 million this time last year. While some believed the investors would squeeze costs out of the security vendor to increase its valuation, Apax and Sophos management said there would be substantial investments designed to grow the company.
Astaro definitely has this potential. The German-based company has been getting more aggressive in expanding its customer footprint in North America. It has more than 2,500 partners, which will nearly double the size of the existing Sophos channel community. And it’s provides technologies that complement Sophos’ existing antivirus, antispam, encryption and data loss prevention products.
Culturally, though, Sophos will have to deal with the assimilation of a hardware company into what has been traditionally been a software-first organization.
The acquisition could prove interesting in the competitive landscape. It will immediately put Sophos in the crosshairs of UTM market leaders such as SonicWall and Fortinet, but also security powerhouses such as Check Point and Juniper.
Sophos was once the leading corporate alternative to Symantec, McAfee and Trend Micro. In recent years, it’s been eclipsed by Kaspersky Lab, which is threatening to overtake Trend Micro to become the world’s third largest antivirus vendor. The addition of Astaro will not only boost Sophos’ bottom line, it will give it a competitive differentiator to its chief rival Symantec.
Down the line, the deal may make Sophos a more attractive acquisition target. Major infrastructure companies such as Hewlett-Packard and Cisco are looking to expand their security capabilities. HP missed the opportunity to buy McAfee in 2010 after years of on-again, off-again courtship; McAfee was later bought by Intel. Cisco is shedding products and management, but has stated that security is a focus area for its return to stability. And, Microsoft and IBM are always on the short list for a major security acquisition.
The Sophos-Astaro deal will put the combined company higher up on the security ladder. It will be interesting to watch how these two companies come together, how they will integrate their disparate channels and how the marketplace will respond to the new competitive challenge.
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Lawrence M. Walsh is CEO and president of The 2112 Group, a technology business advisory service that specializes in optimizing indirect channels and partner relationships. He’s also the executive director of the Channel Vanguard Council. He is the former publisher of Channel Insider and editor of VARBusiness Magazine. You can reach him at firstname.lastname@example.org.
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