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Check Point's dollars catch Sourcefire

Company's $225 million acquisition of Sourcefire comes as Check Point tries to expand beyond its core firewall and VPN businesses.

Check Point Software Technologies plans to acquire intrusion prevention company Sourcefire in a $225 million deal, as it seeks to expand beyond its core firewall and virtual private network businesses.

The acquisition marks a rare decision by Check Point to buy, rather than build, its security technology. But in buying Sourcefire, Check Point may be reacting to pressure as networking giants such as Cisco Systems and Juniper Networks, as well as software giant Microsoft, focus more and more on security.

Under the deal, Check Point will pay $225 million in cash and assume Sourcefire's stock option plan. The deal is expected to close in the first quarter of next year, pending shareholder and regulatory approval.

"Over the past two years, Check Point expanded its strategy from primarily offering perimeter gateway security solutions to provide a fully integrated architecture for perimeter, internal, Web and end-point security," Gil Shwed, Check Point chief executive, said in a statement. "The acquisition of Sourcefire is an important step in delivering this expanded strategy by enhancing our set of attack prevention intelligent technologies and providing the most comprehensive internal security solutions portfolio."

Sourcefire, a privately held company in Maryland, develops security appliances based on its Snort open-source intrusion prevention and detection technologies, and real-time network intrusion sensors.

More acquisitions on the way?
"We staffed the company to potentially be a standalone company, but the synergies with Check Point were so obvious," said Wayne Jackson, Sourcefire chief executive. "A combined company would have a lot more opportunities than a standalone company. This will give us an opportunity to leverage more than 2,000 channel partners...We have 100 channel partners."

Check Point expects Sourcefire will account for 6 percent to 8 percent of its overall revenues next year, Shwed said during an interview.

"Sourcefire fits right in with our portfolio of products and compliments them," Shwed said. "Over time, we want to offer a single integrated management product and then embed more and more joint technologies in each of the products."

He estimated it may take six to 12 months to offer an integrated management product.

Check Point, based in Israel, was previously slow to introduce new products and react to market changes, such as the addition of security appliances, until this past year, analysts have said. They have noted that Check Point generally prefers to build its own security technologies, rather than acquire companies, with one of the more notable exceptions being its Zone Labs acquisition in 2003.

Check Point may engage in more acquisitions in the future, but Shwed noted that the pool to choose from is very small.

"Very few companies can offer us added value and fit our needs, market reach and opportunity," Shwed said.

In addition to announcing the Sourcefire acquisition, Check Point issued a preliminary warning that its third-quarter revenue will fall in the low range of its revenue guidance given in July. Check Point expects to report revenue between $140 million and $141.5 million for the quarter, when it issues its quarterly results Oct. 28. Previously, the company's revenue range was $140 million to $150 million.

Check Point attributed the lower revenue figures to a summer slowdown.