CyberGuard's M&A Mojo

Smaller firms, such as CyberGuard, are on the lookout for potential targets

March 23, 2005

3 Min Read
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The M&A strategies of big security names such as Cisco Systems Inc. (Nasdaq: CSCO) and Juniper Networks Inc. (Nasdaq: JNPR) continue to attract plenty of attention, but lets not forget the smaller vendors who are also jockeying for position in an attempt to win a share of a growing market (see Juniper's Slow Shopping Trip and Could Sygate Get Snapped Up?).

Take CyberGuard Corp. (Nasdaq: CGFW), for example. The firewall/VPN vendor and content management specialist is approaching $20 million in quarterly revenue and has been quietly picking up companies left, right, and center for much of the last two years. Back in 2003, the company purchased certain assets of NetOctave, and snapped up firewall/VPN vendor SnapGear (see CyberGuard Buys Piece of NetOctave).

Last year CyberGuard acquired German content security specialist Webwasher AG and made an unsuccessful bid for Secure Computing Corp. (Nasdaq: SCUR). (See CyberGuard Acquires Webwasher and SCUR Spurns CyberGuard Suitor.)

Then, last week, the Boca Raton, Fla.-based vendor stumped up $3.6 million for the anti-spam, anti-virus, and URL filtering assets of Zix Corp. (see CyberGuard Gets Zix's Anti-Spam).

This may seem like chicken feed compared to the $4 billion that Juniper coughed up for Netscreen, but there is certainly method in CyberGuard’s madness. Pat Clawson, the company’s CEO tells NDCF that the latest deal is as much about acquiring new customers as new technology.”We will integrate some elements of Zix into our current suite of content security products,” he says. However, the deal has also brought CyberGuard around 1600 new customers, which include big names such as Eli Lilly and Anheuser-Busch, adds Clawson.

”We will upgrade these customers with [our] Webwasher [product] -–either software-based or the WW1000 appliance,” he says.

These companies will join CyberGuard’s existing customer base, which numbers around 10,000 organizations. Clawson was unwilling to give too much away on the makeup of this list, although he confirmed that CyberGuard has already enjoyed some success with the likes of AT&T Corp. (NYSE: T), Intel Corp. (Nasdaq: INTC), and Credit Suisse First Boston Corp.

The exec was a little more forthcoming on CyberGuard’s future acquisition plans, declaring that the company has a “dedicated corporate development team” on the lookout for potential targets.

Although unwilling to name names, Clawson says CyberGuard is particularly interested in companies in a number of areas. These include scanning and blocking technologies, policy enforcement, and intrusion and prevention. Another hot area the company is looking into is secure authentication and single sign-on.But CyberGuard is not the only vendor outside the big-name players that is getting busy in the security space. Netifice Communications, for example, recently snapped up Aventail Corp.’s SSL VPN services arm and is already on the lookout for more of the same (see Aventail Sells Managed Services Division and Netifice Looks for VOIP Deals).

Other notable deals include SafeNet Inc.'s (Nasdaq: SFNT) acquisition of digital ID firm DataKey

and Tut Systems Inc.'s (Nasdaq: TUTS) deal with CoSine Communications Inc. (Nasdaq: COSN). (See SafeNet to Acquire Datakey.)

Like CyberGuard, Tut Systems was also keen to get its hands on a new and potentially lucrative customer base following the $24.1 million CoSine deal (see Tut Takes On CoSine).

One thing is for sure -- the security threats faced by businesses are increasing, which is giving momentum to a broad range of vendors (see Beware of the Trojans!, Cloakware Secures $10M, and Vontu Brings Funding to $25M).

CyberGuard will provide more details on its long-term plans for Zix on its April 26th earnings call.— James Rogers, Site Editor, Next-Gen Data Center Forum

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