Websense Makes $400 Million Bid For SurfControl

U.K.-based SurfControl, which started out in content filtering and email security, last July added managed services to its portfolio by acquiring BlackSpider Technologies.

BlackSpider is a key asset for Websense in the acquisition because it provides email and web filtering managed services, protecting companies from viruses, spyware, phishing, and other malware, Gene Hodges, CEO at Websense, said in a conference call.

Websense plans to leverage SurfControl's small business savviness as well as incorporate elements of its channel strategy, said Doug Wride, CFO at San Diego-based Websense. Wride will take over as president of Websense and lead the SurfControl integration efforts.

Websense sees strong demand for managed web and email security services, which makes the BlackSpider portfolio a good fit, Hodges said, adding that the two companies would have more than 41 million seats under subscription if the deal is approved.

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"This will give us an email security offering that we can sell in current and future SMB products," Hodges said.

Websense's goal is to create a content security company that will be better able to compete with Symantec, McAfee, and Trend Micro, Hodges added. "This gives us the scale to allow us to compete and a strategy for the SMB segment."

Websense has been working to expand its distribution strategy, and SurfControl would provide an extensive VAR network to go with Websense's existing stable of 1,450 channel partners, Hodges said. In SurfControl's latest quarter, revenue from channel partners accounted for 79 percent of sales, up from 67 percent in the year-ago quarter.

In an email blast to partners, Hodges said that once the deal closes the company will implement a "no customer or partner left behind" program -- including SurfControl subscription renewals similar to historical prices and support of SurfControl's layered Web and email security products through 2010; an on-demand, software-as-a-service offering for web and email security, powered by BlackSpider; and a total protection solution -- including layered email security.

Peter Bybee, president and CEO at Network Vigilance, a San Diego, Calif.-based Platinum level SurfControl partner who sits on the company's reseller advisory council, said he was surprised and concerned when he first learned of the acquisition.

That said, Bybee stressed that he was hopeful WebSense top executives would reach out and court the top SurfControl partners before making decisions on how to merge the two separate channel programs.

"My message is get input from channel partners [before merging the two channel programs]," he said. "Don't make decisions in a void. I remain hopeful that it will be a beneficial relationship and we'll have more solutions and a bigger pie of services to sell."

Ultimately, the combination could be a "good thing for channel partners because there are products on both sides that will enhance and compliment one another," said Bybee. "As a result, there will be a broader array of products solution providers can sell."

Bybee said that one big difference between WebSense and SurfControl is WebSense was relying on a two-tier distribution model, whereas SurfControl retained tight direct relationships with its solution providers. That meant a tight relationship that is sometimes not the case with vendors relying on two-tier distribution, he said.

"The SurfControl channel program has traditionally been better for resellers," said Bybee, noting that WebSense has gotten much more channel friendly and savvy under CEO Gene Hodges, who took the helm in January 2006.

If the acquisition is approved, it would be the second -- and by far the largest -- in Websense's history. Last December, Websense bought data leak prevention startup PortAuthority for $90 million.

Websense estimates cost synergies of more than $60 million if the deal is approved by regulators. "We believe that this is [an acquisition] that clearly deliver value by being accretive," said Hodges.

At the close of the acquisition, Websense will offer a product line, although not yet integrated, that includes inbound and outbound content control, said Hodges.

In the next couple of years, Websense will work to leverage SurfControl's technology to offer products optimized for various parts of the market, he added.