McAfee's acquisition of Secure Computing

Chenxi Wang

McAfee announced today it is acquiring Secure Computing, at the price of $465 million. Does this acquisition make sense?

Secure Computing has a market cap of $380 million, with 2007 revenues of about $250 million and $21 million cash on hand. This acquisition price, which represents a 22.69% over its market cap and less than 2x revenues, is relatively modest. So for McAfee, it's a good deal. In addition, although McAfee is a strong player in the endpoint market, is not a market leader in its network security play. The addition of Secure Computing, plus the recent acquisition of Reconnex, will clearly energize that part of the house.

For Secure, this brings some much needed help in terms of marketing and external communication. Secure Computing has solid technology in Web and email security, but after many years in the business, is still not as much a household name as some of its competitors. Secure Computing's other product line, its Sidewinder firewall business, may seem disparate at first glance, but can put McAfee in a nice position to enter the unified threat management (UTM) market.

What does this move mean for the rest of the market? It puts clear pressure on other players in the content security market, in particular Symantec. Symantec has a wide reach with its Brightmail product and a growing data leak prevention (DLP) business as a result of its Vontu acquisition, but its presence in the web security market is comparatively small. To compete with Websense and an invigorated McAfee, Symantec needs to strengthen its commitment in content security or risk losing market share.