Wednesday, October 8, 2008

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Symantec Moves To Dominate SaaS-Based Enterprise Security

In a deal that defies the current economic crisis, Symantec has agreed to pay a premium price of $695 million in cash for the U.K.’s MessageLabs, the reported leader in online messaging and Web security services for the enterprise market.

Symantec plans to meld its own competitive “Protection Network” online security service with MessageLabs, which had 31.7 percent market share last time we looked (TelecomWeb news break, March 21), creating a combine that should dominate the market. MessageLabs claims an installed base of eight million end users at more than 19,000 clients ranging from small businesses to the Fortune 500.

Both MessageLabs and the Symantec Protection Network are Software as a Service (SaaS)–based offerings and, thus, the acquisition gives a major boost to Symantec’s SaaS strategy. Symantec wants to cross-sell its own SaaS offerings of backup, storage and online remote access into the MessageLabs customer base.

“MessageLabs extends our investments in the SaaS segment and will allow us to offer our customers unprecedented choice from a single provider of message security solutions” says Symantec Chairman and CEO John Thompson. “By combining MessageLabs with our Symantec Protection Network team, we have one of the strongest portfolios of cloud-based infrastructure services and a great foundation on which to grow.”

Thompson didn’t comment on the price Symantec is paying relative to the size of MessageLabs business – a purchase price that’s almost five times annual sales. In the fiscal year ended July 31, MessageLabs did about $145 million in sales. Although its growth rate was a healthy 20 percent, clearly Symantec’s game plan envisions the total value of the deal as being far greater than the sum of the parts. In addition to cross-selling and upselling existing MessageLabs customers, Symantec expects MessageLabs’ 14 worldwide data centers and “significant expertise in SaaS sales, operations and support” will result in international expansion of its own current Symantec Protection Network services. At the same time, Symantec adds, its own SMB and enterprise channel programs will expand the global access to MessageLabs offerings.

Financial terms of the deal, which is set to close before the end of the year, include partial payment in U.S. dollars and part in Pounds Sterling - 310 million Pounds Sterling and $154 million in U.S. currency.