Bigger Websense Vows Complete Protection
Tech security providers have recently sought more safety in numbers, gobbling up other firms for hundreds of millions of dollars.
Employee Internet use monitor Websense WBSN is the latest to try it, on the heels of Cisco Systems $830 million pick-up of IronPort Systems in June and Symantec's April buy of Altiris for $815 million.
Websense's more than $400 million deal for its main rival, U.K.-based SurfControl, closed on Wednesday.
With a market cap of about $927million, Websense already was fourth-largest in IBD's 42-company Internet software group. Bulking up helps firms compete in an increasingly consolidating space, Websense President Douglas Wride says.
He spoke this week with IBD about the changing competitive landscape and Websense's aim to take on a bigger role in security.
IBD: What essentially does Websense do?
Wride: Websense is, through this acquisition, executing our strategy to be a content security company. That is a migration from Web filtering (for instance, blocking gambling or adult sites) to Web security (blocking Web-based threats) to now content protection.
So it's not just about historically preventing people from going where they could find security risks. Now we're talking about keeping good content from getting out where it shouldn't go. It gives us a complete protection wall around content.
IBD: How many organizations use Websense and SurfControl products?
Wride: Fifty thousand customers, and that's about 50-50. Websense has traditionally focused in the enterprise world and for the last year and a half we've been driving toward the domestic SMB (small and midsize business) market. SurfControl's strength has historically been in that SMB market. So this is a natural fit.
IBD: This is your second and largest acquisition. Do both speak to a common theme?
Wride: Absolutely. In early 2006 we developed our strategy, presented it to our board and started moving toward this ability to protect content.
Our ($90 million) acquisition in January of PortAuthority gave us information leak prevention capability, ILP, and that keeps the good content in. Merging that with our awareness of what's going on on the Internet, we created our Content Protection Suite, which we released early Q3. So, from that standpoint, that acquisition was about new technology.
The SurfControl acquisition is twofold. One, it's expanding our market and really accelerates our move into the SMB space. It also gives us a product we have not had in the past, and that's an e-mail security product which we can now cross-sell into the Websense installed base. We now have a complete complement of products and distribution capability for all sizes of markets.
IBD: What are the effects of acquiring your biggest direct rival?
Wride: As we move into this content protection capability, we are at a minimum competing for budget dollars against the larger security companies: the anti-virus companies, the firewall companies, and so on. So being larger and having a larger installed base works to our benefit.
There's a financial aspect to it, in that we think we can run the two combined businesses for less than the two combined are spending. So we think that it can be financially very rewarding to our shareholders. Thirdly, it certainly gives us a larger presence in what we have historically made a very profitable niche, in Web security.
IBD: Who will some of your top direct competitors now be?
Wride: Our positioning is that we're the only company that can deliver this total type of content solution -- you can have one vendor that can do it all. Rather than having to go to a Vontu, for instance, to get ILP and then go to possibly a Secure Computing SCUR for Web and e-mail security, we can offer it all.
IBD: What are some efficiencies you expect?
Wride: The obvious G&A (general and administrative expense) types of items. We certainly have what I'll call variable marketing efficiencies. Historically, because we're competitors, we advertise in the same publications. We now only need one of those ads, not two. We go to the same trade shows, we don't need two booths, and those kinds of things. And then when you think in terms of engineering and sales processes, there are certainly benefits.
IBD: Any new product plans at this point?
Wride: In general, we will take their Web filtering products and support those through 2011. The e-mail products they have, we'll have the opportunity to cross-sell those into our installed base. I think we will combine to make their on-demand delivery a better product. And then our information leak prevention is a product offering that SurfControl customers have not had the opportunity to buy and now they will.
IBD: Have the terms of the deal changed since you announced the acquisition?
Wride: The value of the transaction is somewhat influenced by the exchange rate between the dollar and the pound. (Websense says its final purchase price was about 204 million pounds, or $417 million.)
Reproduced from an article published by CNN Money
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