October 2, 2006 4:00 AM PDT

Security firms jump in the acquisition pool

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Check Point, a pioneer in firewalls and virtual private networks, has faced a challenging environment, with its stock off nearly 22 percent from its 52-week high of last October. Its second-quarter revenues are down 4 percent, to $138.9 million, compared with a year ago. During the past four years, the company has seen its stock suffer amid flat product sales.

One analyst, however, recently upgraded Check Point's stock to a "buy" from a "hold," based on the belief its sales will strengthen during the remainder of the year and that the climate has become even more attractive for security acquisitions.

"The healthy premiums paid for RSA and ISS might spur other companies in the space to consider selling."
--Katherine Egbert, analyst, Jeffries

"The healthy premiums paid for RSA and ISS might spur other companies in the space to consider selling," Katherine Egbert, an analyst at Jeffries & Co., stated in her report. "This might be even more true at Check Point, as management--traditionally not a willing seller--contemplates the expensive replacement of several key executives at once."

Secure Computing, meanwhile, has been trying to bulk up, announcing in July that it was acquiring messaging security company CipherTrust for $273.6 million. But investors panned the deal, pushing the stock down 38 percent to $4.99 on the day after it was announced. Secure's share price has yet to recover to its previous trading levels, hovering around the $6 to $7 a share range.

But John McNulty, Secure Computing's chief executive, contends that the company's position is enhanced with the deal, noting the specialist in unified threat defense is acquiring a "market leader in messaging."

Check Point, McAfee and Trend Micro declined to comment for the story.

And as the consolidation of the security industry further progresses, and as protective technology becomes embedded into other kinds of product, one analyst predicted that standalone security companies would become extinct.

Walter Pritchard, an analyst at Cowen & Co., described their future this way: "Security, at the end of the day, is an adjective. It's a way to describe things. There will be a base level of security that will be embedded into storage, desktops and servers."

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money can't buy you real security....
Personally, I think that spending billions of dollars to buy out a security company isn't going to solve many problems. It's important that the merge between the security company and the business is compatible, this often requires more than just purchasing or partnering with a big name security company. But I'm sure it'll take them another good 20 years to figure that one out.

Honestly, I think SMB's have it the best. They may not have the money to buy out huge security companies, but because they don't, they have to be smart about their choices in spending. They WILL finding a security solution that is a right fit with their business.
<a class="jive-link-external" href="http://www.essentialsecurity.com/news.htm?id=25" target="_newWindow">http://www.essentialsecurity.com/news.htm?id=25</a>
And also, because most are start-ups, they will have the opportunity to incorporate security measures from the start, rather than trying to change up their company culture to squeeze it in.

It's not about buying that big house that has rooms you'll never use. It's about buying that comfortable, quaint house that is a firm foundation on which to build upon and has the ability to be improved upon and remodeled to adapt to the times.
Posted by mveronica (40 comments )
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