July 17, 2002 2:35 PM PDT

Symantec doing fine by security

Consumer and business security firm Symantec on Wednesday reported strong first-quarter earnings and the acquisition of three security firms for a total of $375 million in cash.

The one-time desktop utility and anti-virus firm booked $316 million in revenue for the quarter, a jump of 39 percent from a year ago. Separately, Symantec announced it will buy three niche security companies: intrusion detection software maker Recourse Technologies, managed security firm Riptech, and vulnerability information firm SecurityFocus.

Symantec posted a net profit of $56.6 million, or 36 cents a share, compared with a net loss of $21.2 million, or 14 cents per share, for the year-ago period.

"By just about anyway you want to cut it, we've done well," said CEO John Thompson. "Many of our products operated at a level that we have not seen in the fiscal first quarter."

Sales in the business market grew 35 percent, while sales of consumer products grew a whopping 90 percent.

The positive news stands out among many warnings from the technology sector this earnings season, as the industry continues to wallow amid a sluggish market.

The Cupertino, Calif., company's weakness seems to be the intrusion detection market, a sector where Thompson "was not at all pleased" with the results. The company's performance against its intrusion detection rivals is one reason Symantec bought Recourse Technologies, Thompson said.

"It is the only software solution that we could find that could maintain gigabit speeds," he said, referring to the rate at which the software can look for attack signatures in incoming Internet traffic. Symantec has offered $135 million in cash for the company.

The company also signed a deal to buy SecurityFocus, the publisher of the BugTraq news group, where hackers and security consultants first post information about new security holes in software. The deal for $75 million in cash also adds the start-up's threat tracking and alert technology. The BugTraq list is expected to continue to be published by Symantec under the SecurityFocus brand.

The acquisition of Riptech adds additional managed security expertise and resources to Symantec's stable. With Riptech, Symantec gains security operations centers in Virginia, Texas, the U.K., Germany and Japan.

"This is an awfully important series of moves which delivers on the message that security is not just about intrusion detection, firewalls and anti-virus, but about analysis and service," said Thompson.

The three companies join a fourth, security management software maker Mountain Wave, which Symantec bought at the beginning of July for $20 million in cash. The company adds its CyberWolf management system to Symantec's product line. The software product automatically monitors, filters and cross-correlates data about potential security events across a company's network.

In total, the four companies add about 350 people, which Symantec intends to integrate.

The integration will not be easy, Thompson said.

"This is four energetic and bright teams that need to become part of Team Symantec," he said, adding that additional near-term acquisitions are unlikely. "We need to integrate before we look beyond our walls again."

At least one analyst thought the moves were the right ones for Symantec.

"It is obvious that Symantec plans to take and own a leadership position in security," said Peter Lindstrom, director of security strategies for the Hurwitz Group, an analyst firm. "And all the acquisitions strengthen places whether the company was traditionally weak."

 

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