Security space to see more buys in 2007

The security space is going to see a lot of acquisitions this year as pressure on standalone security providers is on the rise.

A handful of high-profile deals were pulled off in the security sector during 2006, including EMC's buyout of RSA Security for $2.1 billion and IBM's acquisition of Internet Security Systems for $1.3 billion.

The other notable acquisitions include McAfee's $20 million buyout of Onigma, Websense's acquisition of Port Authority Technologies for $90 million in cash, Pointsec Mobile Technologies' purchase by Check Point Software Technologies, BT's acquisition of Counterpane for $40 million and the latest being Cisco, which acquired IronPort for $830 million. The list promises to continue in 2007.

"One can expect more deals where non-traditional security players invest in security technologies and large security companies investing in non-security acquisitions to expand their business models," says Kartik Shahani, director Sales), McAfee India.

The eyes are set on UK-based Sophos and peers like F-Secure, Trend Micro, Kaspersky Labs and Panda Software that are likely targets for acquisition by vendors like IBM, HP and Oracle. And of course, the elephant in the corner is Microsoft, which is on a security spending spree.

"The security market in 2006 was ruled by top six vendors that accounted for 40 per cent of the total market revenue and the same will garner a 65 per cent revenue share by 2007," says a Gartner report.

Larger software companies are most likely to pick up smaller security enterprises. "Now-a-days no major IT vendors can tell the customers that security is not their worry," says Niraj Kaushik, country sales manager, Trend Micro adding the security software industry was experiencing consolidation as customers were seeking all-in-one, best-of-breed security solutions.

Top-tier companies are likely to seek startups with market-tested technology and long customer lists and not just firms with clever or interesting innovations, is the sentiment on the streets.

"It's an acquisitive market that illustrates forces at play not seen in an earlier era," remarks Kaushik.

Through the acquisition of anti-spyware maker Giant Company Software and anti-virus vendor Sybari Software, Microsoft has positioned itself to offer a variety of security solutions that are designed to integrate seamlessly with Windows and take advantage of some of the security technologies that the Redmond-based giant has built into XP Service Pack 2 and other products.

"Along with the arrival of a range of security technologies from Redmond-based Microsoft, both in standalone form and as features included in its newly released Vista operating system, the push by larger security software providers to diversify their product lines and generate opportunities in emerging sectors of the market will spur more deals in 2007 than have been seen in previous years," predict analysts.

Still, there are options left for startups that have not been acquired in the current buying spree. Many are expected to revamp their products to fit into new, post-acquisition niches, finishes a market watcher.

A Gartner report predicts that potential acquirers of email security companies include firewall and network equipment vendors and competitors looking to rapidly acquire market share and eliminate competition.

"Efficient and accurate spam and virus filtering with low administration overhead remain essential to buyers; however it is generally the secondary features that win deals," states the Gartner report.