A new wave of acquisitions, this time among smaller companies,
is moving through the Internet security industry, with one acquisition
yesterday, another today, and reports of merger talks between two European
CyberSafe, run by ex-IBM and Perot Systems exec Jim Cannavino,
today announced it has acquired Canadian encryption firm Sagus Security in a deal for an
undisclosed amount of cash and stock.
Yesterday Alladin Knowledge Systems
purchased eSafe Technologies, an Israeli firm with a Seattle sales office
that has software to block hostile Java applets, for about $11 million in
cash and stock.
Today British encryption firm Zergo Holdings Plc said it's in merger talks
Baltimore Technologies, an Irish
digital-certificate company that just opened U.S. operations, according to
The three deals reflect a number of themes in the continuing consolidation
of Internet security firms, the most important being that one-product
companies are being swallowed by larger firms with better distribution. In
addition, Internet security firms are trying to bolster their security
consulting forces to help companies integrate complex technologies.
"There is tremendous demand for computer security
consulting," said CyberSafe's Katherine Hutchinson, vice president of
marketing. The purchase of Sagus, a privately held firm that like CyberSafe
has annual revenues of more than $10 million, also gives CyberSafe a
distribution network in Europe and an East Coast foothold to use for
customer support for European customers.
Larry Dietz, security analyst at Current Analysis noted eSafe's
problems with catching hold in the market, though it has around $5 million in
"While eSafe was able to establish its technology, it was never able to
jump over the hurdle of distribution, and Aladdin is a longtime player in
the security world," said Dietz, noting that Aladdin's main business is
software license management. The Israel-based firm is expected to hit
around $40 million in revenue next year.
Zergo, the British firm now talking with public-key infrastructure player
Baltimore, in September signed a marketing partnership with Unisys.
"Some companies are reluctant to seek an initial public offering in the
current climate so a merger like this would be a good way for Baltimore to
gain access to capital," said Jemma
Houlihan, a technology analyst at ABN Amro..
Zergo, which is traded publicly in London, earlier acquired Security
Domain, which has e-commerce software. Baltimore is a privately owned Irish
company in which Irish
financier Dermot Desmond holds a 60 percent stake.
In September, President Clinton and Irish premier Bertie Ahern signed a joint statement on Internet
commerce using Baltimore Technology's digital signature system.
Bloomberg contributed to this report