Symantec to Acquire MessageLabs, Jump Start SaaS Business

| Oct 9, 2008 | Enterprise Security | Competitive Intelligence Report

| Analyst: Andrew Braunberg

Current Perspective: Positive/Neutral
Vendor Importance: High
Market Impact: High

Event Summary

October 8, 2008 – Symantec has announced it has signed a definitive agreement to acquire MessageLabs, a provider of online messaging and Web security services. Under the terms of the agreement, Symantec will acquire MessageLabs for a purchase price of approximately $695 million in cash, subject to foreign currency adjustments, payable in approximately £310 million Pounds Sterling and $154 million US Dollars.

Analytical Summary

• Current Perspective: Slightly positive on Symantec’s acquisition of MessageLabs because it significantly accelerates the company’s position in the security as a service market. It also creates strong cross sell opportunities for Symantec’s existing Symantec Protection Network services (i.e., Online Remote Access, Online Storage, and Online Backup) as well as providing a platform for numerous additional security as a service offerings in the future. On the downside, the deal did not come cheap, which is a concern given the current uncertainty in the global economy. Symantec also does not have an unblemished record when it comes to acquiring large companies.

• Vendor Importance: High to Symantec because MessageLabs brings technology, global reach for its services through the creation of 14 data centers on three continents, more than 500 employees with strong SaaS sales and support expertise, an impressive customer list (19,000 strong), sizable revenue ($145 million in FY08) and solid growth (20% year over year (FY08/FY07)). The deal is also of high importance to MessageLabs, which finds a potentially safe harbor in Symantec and ceases to operate as an independent entity.

• Market Impact: High on the secure messaging and Web security markets because this deal illustrates a fundamental fact about security deployments: namely that form factor is critical. Symantec has a mature set of Web security and secure messaging software products and appliances but the real growth in these markets over the next few years will be seen in delivering these capabilities through a SaaS model. The question of where customers want their security functionality to live, in this case on the client and/or server, at the gateway, in the cloud, or some combination of those locations, is the key consideration for vendors as they make product development plans.

Recommended Competitor Actions

• This deal should be positioned as a “me too” announcement by Symantec, which has been late to appreciate the growing importance of cloud-based delivery mechanisms. Several competitors can and should point to existing SaaS offerings. These include Google’s Postini services, McAfee Total Protection Service (now enhanced by the Secure Computing acquisition), Panda Security’s Managed Office Protection, and Webroots’s Email Security SaaS.

• Competitors should claim that Symantec is no longer capable of innovating internally. The company has made so many acquisitions over the last few years that it has been reduced to working full time on integration, user interface, and management issues. This has reduced the company’s strategic horizon, which only adds to its problems.

• Competitors that have yet to fully realize a SaaS strategy quickly need to come to terms with the changing threat landscape and the limitations of current approaches to delivering endpoint threat protection. In addition to pure SaaS solutions, vendors should consider hybrid client/cloud approaches, which also address many of the growing limitations to traditional on-device software solutions while alleviating some of the potential latency and control issues with pure SaaS services.

Recommended End User / Customer Actions

• Existing Symantec customers should be pleased with this announcement. This acquisition will provide Symantec customers with additional deployment choices and more flexibility in provisioning services, particularly to new users.

• Existing MessageLabs’ customers should be mildly positive regarding this announcement. Symantec is a large and fairly stable home for MessageLabs but one with a mixed record for integrating acquisitions. The good news for MessageLabs customers, or any organization that adopts SaaS, is that switching costs are low.

• Prospects should consider Symantec’s entire line of Web security and secure messaging solutions. The company offers software, appliances, virtual appliances, and now SaaS. It will also, no doubt, offer a combination of these deliverables to provide hybrid solutions.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

| Client access - Full report in Enterprise Security | More information

Top