CipherTrust: Big Plug For Secure Computing's Hole

The CipherTrust acquisition may be just what is needed for Secure Computing, one of the oldest and yet more forgettable vendors in the security market. Secure Computing, founded more than 20 years ago, boasts the award-winning SidewinderG2 firewall, as well as the competitive WebWasher filtering software and token-based identity management systems. The company has inroads to the government and other verticals that require strong, reliable security, but Secure Computing doesn't stand out among market leaders or even its secondary peers.

CipherTrust, however, is a rock star in the messaging security market. Founded in 2000 by serial entrepreneur Jay Chaudhry, the Georgia-based company has built an impressive $50 million business around basically one product, the award-winning IronMail e-mail firewall. In the past two years, the company has augmented the appliance's capabilities by adding instant messaging security and TrustedSource, a system that rates an e-mail's source to guard against phishing and viral attacks.

"Combined, we think we have a company that goes together hand-in-glove. And the technology that brings to the party will help us differentiate our existing product line, in addition to adding the capabilities of adding CipherTrust technology to the mix," says Secure Computing CEO John McNulty in a channel exclusive with VARBusiness. "We see the potential of building a powerful enterprise gateway security company."

Technology and market analysts were quick to dismiss the $274 million acquisition announced early this month. Between a poor second quarter and the diluted valuation of its outstanding shares, Secure Computing's stock has plummeted by nearly half. According to IDC, the digital messaging security market is expected to grow upward of $1.7 billion annually by 2008. So it's easy to see why Secure Computing would spend $274 million—nearly three times its 2005 revenue—to snap up CipherTrust.

"When John and I compared notes at the RSA Conference, we saw such a wonderful synergy between the two companies, and that our combination could create the leading, independent security company in the market," says Chandhry, who will become the new company's chief strategy officer.

The deal gives CipherTrust a broad channel outlet for distributing and selling its product. Partners say that CipherTrust's fledging channel program was inconsistent and lacked leadership.

"It's a great thing for CipherTrust from a channel perspective, because they've lacked strategy and leadership," says Holly Thillet, executive vice president for the East region at FishNet Security in Alpharetta, Ga. "They really haven't had a channel strategy. Secure will definitely bring them that."

CipherTrust's channel program consists of roughly 180 partners in North America, plus a spattering of international distribution agreements. Though it was slowly turning the corner from a direct to indirect sales model, most of its revenue comes direct from enterprises. Secure Computing, meanwhile, has 1,700 partners globally, of which only 100 overlap with CipherTrust's. Since Secure Computing offers a specialty security technology—a highly complex offering that requires more touch than competitive products by Cisco Systems, Check Point and Juniper—the addition of an e-mail security appliance will give partners something new to market.

"Secure Computing is becoming a security solution provider," says Mark Sollazo, president and CEO of Synercomm, a networking and security VAR in Green Bay, Wis. "We may not represent their solutions every time, but they give us a good gift bag to help solve our customer's business pain."

NEXT: Examining the deal's true potential.