Symantec just announced an acquisition of UK based MessageLabs at an incredible 4.8X trailing revenue multiple. McAfee only paid 2X for Secure computing. At those multiples Webroot is worth over $500 million and Fortinet would go for $1.2 Billion (my estimates). I admit that this is a good time for companies with cash to make acquisitions but I would expect the valuations to be going down not up!
This is a big push for Symantec to get into the so called Security as a Service space with a hosted email security solution. Email is frankly the only succesful SaaS model out there. Secure hosting and file transfer qualify as well, but are still in their infancy. If this continues, watch out for reports of a feeding frenzy in the security space. Qualys, the SaaS vulnerability management firm, is sure to be sucked up next.
While I think hosted email is a great service and a great business model, I am perplexed by some not so lustrous outcomes from previous acquisitions. St. Bernard Software acquired an SMB vendor in this space called Singlefin and it is not going well. Webroot acquired another UK SaaS email vendor called Email Systems and word is that they are not setting the world on fire. There actually appears to be a geographic predilection for hosted email centered on the UK for some reason.
Proofpoint, who arguably has one of the best technology solutions for antispam, is one of the last standing vendors in the email security space now. They have a US based hosted solution in addition to their server product but, thanks to ATT and the NSA and the paranoia their network monitoring induces, is has not grown as quickly outside the US. They acquired Fortiva, an email archiving solution, which is actually OEM'd by MessageLabs (and Microsoft's managed email service) which should make life complicated for Symantec.
Email security is a vibrant space. This acquisition is a great opportunity for Symantec to demonstrate that they can execute on their split personality data center + security business model; while the remaining email security vendors hope that the result will be similar to Symantec's Brightmail acquisition: the competition falls into a black hole never to be heard from again.
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Richard Stiennon is a security industry analyst. He is currently consulting, speaking and writing on all manner of security topics for IT-Harvest, the IT research firm he founded to cover the security space. He was most recently chief marketing officer for Fortinet. He has served stints at PricewaterhouseCoopers, Gartner, and Webroot Software.
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Wrong -- Symantec got messagelabs cheap!
In terms of valuation multiples, you have the wrong comparisons. The right comparison is Postini, the number 2 anti-spam service, acquired by Google last year at 10x trailing revenue. Symantec paid less than 5x trailing revenue for the number 1 anti-spam service. Now, which one seems like the better deal?
The Secure Computing comparison is wrong because Secure's revenue and cash flow have been declining and because it is an "also ran" in the mail security appliance market and not the market leader. It overpaid for its web filtering technology and has been struggling to execute ever since. And so its valuation suffered. McAfee's execution in the same space was (amazingly) even worse, but it has far more cash from its other operations -- which gave it bargaining power.
Although MessageLabs is privately held, so we'd have to do a search at Companies House in London to get a copy of last year's accounts, the quant analysts indicate that MessageLabs revenue and market share were growing. So, to recap, we have the leader in the SaaS anti-spam market with growing revenue and market share vs. an "also ran" appliance vendor with very limited cash and declining share, struggling to complete a previous integration. Which one would you pay more for?
Oh, and... Brightmail v8 just came out
Also, you might want to at least Google "Brightmail" before you write about it falling into a black hole. I see that the day before you wrote your post, Symantec announced Brightmail v8 in software, appliance and VMWare virtual appliance form. And I see on the Gartner site that it is still a leader in the Gartner MQ for email security... with #1 market share. I guess it just kept on selling by itself, huh?
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