[Infowarrior] - A shifting landscape for e-mail security

Mon Jan 8 21:35:28 EST 2007

A shifting landscape for e-mail security

By Joris Evers
http://news.com.com/A+shifting+landscape+for+e-mail+security/2100-7350_3-614
7760.html

Story last modified Mon Jan 08 15:18:57 PST 2007

Cisco Systems' purchase of e-mail security specialist IronPort Systems is
another sign that big-name vendors are taking over the spam fight, analysts
say.

Upon completion of the $830 million cash and stock deal, networking giant
Cisco will join Symantec and Microsoft as a leader in the e-mail security
arena. Those other companies entered the market via acquisitions and product
development of their own.

"As a market matures, this is typically what happens--the major vendors want
to have another arrow in their quiver to sell," said Peter Firstbrook, an
analyst with Gartner.

More acquisitions are likely, with Cisco rival Juniper Networks and tech
giant IBM possible suitors for the remaining independent e-mail security
companies, he said.

E-mail security used to be the terrain of specialized providers, selling to
eager buyers who wanted to stop the influx of e-mail threats, particularly
spam. Today, such technology has become more of a commodity, and the area
has changed from a sellers market to a buyers market catered to by the big
guys, analysts said.

Industry consolidation has been ongoing, driven by e-mail security becoming
a necessity for businesses. Spam and other e-mail pests have kept on rising,
despite Microsoft Chairman Bill Gates' promise to squelch the issue. More
than 90 percent of e-mail is unsolicited, and 2006 was a record year in spam
yet again, according to IronPort statistics.

Acquisitions in the space include Microsoft's takeovers of Sybari Software
and FrontBridge Technologies, as well as Symantec's purchase of Brightmail
and Secure Computing's buy of CipherTrust. As a result, the independent
companies that remain face a tougher market.

"It is a brutal battle against intelligent and well-armed enemies," said
Peter Christy, an analyst with the Internet Research Group in Los Altos,
Calif. "This is a time where antispam companies will start to fall by the
wayside. If you're not in the top four, there is a question of how you
survive with a decent business if somebody doesn't buy you."

Companies such as Proofpoint and Barracuda Networks could be acquisition
targets, Christy said. "Anyone in this space who is not public would like to
be acquired," he said.

The number of companies active in the space has decreased from about 150 in
2003 to about 75 now, said Dean Drako, CEO of Mountain View, Calif.-based
Barracuda Networks, a venture-backed maker of antispam appliances. Yet Drako
believes the market won't consolidate at the pace that pundits have
proclaimed.

"I would characterize the merger and acquisition activity in this market as
overhyped beyond hope for the last four years," he said. "Will there be some
more consolidation in this area? Probably. In the short term, the market is
not going to change significantly from the way it is today. In the longer
term, over many years, the number of suppliers will be fewer."

Drako would not be drawn on the question of whether Barracuda was up for
sale or would launch as a public entity. The company, which markets
primarily to small and midsized organizations, is well-positioned to remain
an independent player, he said. "The customer cares about that the vendor is
large enough to survive to provide them what they need. We crossed that
threshold a year or so ago," he said.

Cisco's entry augurs a tougher battle amongst the big guys. Symantec, in
particular, faces a challenge, compared with the days when it competed
mainly with smaller rivals: The Cupertino, Calif., company used to go
head-to-head with David, now it's squaring off with Goliath. "The last thing
Symantec had over IronPort was their big brand name," Firstbrook said.

On the rise
The e-mail security market is growing rapidly. In 2005, it hit $660 million
in worldwide revenue and was growing at 44 percent per year, according to
Gartner data. Symantec held 12 percent of that pie, and IronPort had 6.6
percent, the analyst firm said.

Cisco paid a premium for IronPort, which is known for its high-end e-mail
security appliances. The $830 million deal is the second biggest purchase of
a privately-held business by Cisco and the fifth-biggest takeover in the
network specialist's history. By contrast, Secure Computing paid $273.6
million in July for IronPort rival CipherTrust.

An acquisition should be welcome news to customers of IronPort and other
such companies that get bought, analysts said. The suitors typically have
deeper pockets, which should translate into more stability. "A private
company, consuming venture capital, is living in limbo," Christy said.

Also, customers will be able to buy multiple products from a single
provider, instead of having to deal with several suppliers. "The more
vendors you have, the higher the administration cost," Firstbrook said. In
Cisco's case, buyers may even be able to get their Cisco discount applied to
IronPort products, he said.

But not all IronPort customers are happy that the company will be part of
Cisco. "There goes the neighborhood," CNET News.com reader Fred Dunn, who
works at a large academic institution, wrote in response to the buyout news.
"With Cisco's reputation, we can already see the annual maintenance fees
going up."

Tom Gillis, senior vice president of marketing at IronPort, assured
customers that nothing will change as the company operates as a subsidiary
of Cisco. "It is business as usual--no changes to products, pricing or
support," he said.