Intel Capital Goes for Czech Mate

Intel Capitals decision to acquire a $16 million stake (reportedly about 20 percent) in Czech antivirus software vendor Grisoft underlines the growing importance of security -- and of Eastern Europe -- to major technology vendors (see Intel Acquires Grisoft).

The deal represents Intel Capital’s largest investment in Central and Eastern Europe to date, and it comes at a time when a number of vendors are casting their eyes eastward. It is now over a year since the European Union admitted 10 new member states, eight of whom (including the Czech Republic) are in Eastern Europe, and the region is now undergoing something of a technology renaissance.

Last year, analyst firm IDC identified Eastern Europe as one of the hottest areas for IT spending in 2005, and vendors have already started to take notice of the region (see IDC Makes 2005 Predictions).

Computer Associates International Inc. (CA) (NYSE: CA), for example, recently announced plans to target Eastern Europe, and IBM Corp.'s (NYSE: IBM) first-quarter results were bolstered by its performance in the region (see CA Slights Breakfast Club and IBM Reports Q1 Results).

Earlier this year, Tom Noonan, the CEO of Internet Security Systems Inc. (Nasdaq: ISSX), which is regarded as something of a security trailblazer, identified the Baltic states, parts of the former Yugoslavia, and “Middle Europe,” as offering a great window of opportunity to help build new security infrastructures (see ISS Sets Out 10-Gig Strategy).Against this backdrop, Grisoft, which sells a range of antivirus software, from enterprise offerings for Linux, email, and file servers, through to consumer products, is seen as a key strategic investment for Intel. Christopher Lawless, senior investment manager at Intel Capital, tells NDCF that the company is using Grisoft to fill a gap in its global coverage. "As these markets emerge, security becomes higher priority for companies,” he says.

But Grisoft’s presence is not limited to the Czech Republic. With a U.S. headquarters in Milburn, N.J., and distributors in such far-flung locations as Australia, Portugal, and Claremont, N.C., the startup claims its products are used on 25 million computers worldwide.

Lawless could not say what Intel’s long-term plans for Grisoft are, although he confirmed that the startup’s software would be “optimized” for Intel processor hardware. Whether this will lead to a joint technology development, though, is uncertain. “It’s unclear at this point whether the technology gets built into the Intel platform,” says Lawless.

This is not the first time that Intel Corp.’s (Nasdaq: INTC) investment wing has gone after the antivirus space. Last year, Intel Capital backed Tarari Inc.’s efforts to enhance its processors with new antivirus features (see Tarari Series B $13.8M Funding).

Intel Capital also helped bankroll another antivirus software vendor, Zone Labs Inc., which was eventually snapped up for $205 million by Check Point Software Technologies Ltd. (Nasdaq: CHKP). (See Check Point Acquires Zone Labs.)Could Grisoft go the same way? “Certainly, that’s a possibility for these guys,” admits Lawless. Although he would not provide any specifics, Lawless also confirmed that Intel Capital is working on other security partnerships. “There are a number of deals in the pipeline. We’re seeing deals out of Asia/Pacific, EMEA, and even Latin America.”

Last year, Intel Capital invested more than $130 million in 110 deals around the world. Around 40 percent of these deals were outside the U.S., according to Lawless.

Intel Capital’s investment in Grisoft is still subject to approval by the Czech Republic’s competition council.

— James Rogers, Site Editor, Next-Gen Data Center Forum