Is SonicWall Pulling Away From Its SMB Core?

SonicWall channel partners say they're confident that the company will remain true to its channel following last week's news of the impending acquisition by investment firm Thoma Bravo, but say that there are signs that the company is pulling farther away from its SMB core as it makes further inroads into the enterprise.

SonicWall announced last Wednesday that it had agreed to be acquired in a deal led by investment firm Thoma Bravo in a deal valued at $717 million. Under the terms of the agreement, current SonicWall shareholders will receive $11.50 in cash for each share of common stock they held, representing a 28 percent premium over the company's most recent closing price. However, the merger's finalization is still contingent upon approval by SonicWall's shareholders as well as other regulatory approvals.

However, SonicWall partners say that, even before the aquisition was announced last week, the company appeared to make strategic decisions indicating that it was slowly pulling away from its smaller SMB and boutique partners while placing more resources and focus on enterprise markets.

Jeff Roback, owner of boutique VAR Praxis Computing, based in Marina Del Rey, Calif., said that over the last several months, SonicWall had suddenly raised Praxis' distribution prices by 10 points, which a rep later said was imposed for not adhering to a $20,000 per quarter quota. Roback said that no notification preceded the price hike and no one responded to his e-mail queries questioning the policy change.

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"That to me kind of says who SonicWall is at this point. They don’t need to be responsive to smaller partners," he said. "It's not to say they're right or wrong. Boutique partners might take up too much of their time. I think they feel the product is so successful that they don't need evangelists."

Roback said that he still was happy with the quality of SonicWall's products. But the unexpected price change coupled with the lack of responsiveness was enough to make him consider other security vendors, he said.

"I don't see how making small VARs uncompetitive in the marketplace helps them. What they may be thinking is that midsized VARs can sell in the SMB," he said. "It's strange because it's not the company that we've been dealing with. It's kind of a sharp change."

The recent enterprise shift isn't entirely unexpected. During its February 2008 partner conference, SonicWall announced that it was planning to make significant inroads into enterprise markets.

At the time, SonicWall CEO Matt Medeiros said that the move was an expansion, but that the company still planned on continuing to focus on its core SMB markets.

Meanwhile, SonicWall executives contend that the company plans to remain true to its SMB partner base.

’The core of our business has been SMB. We built a $200 million dollar company on SMB and an award-winning channel program on SMB. We are expanding into the enterprise. More and more customers are using SonicWALL products and a lot of those customers are enterprise. We are enhancing our offering, but in no way will it be at the expense of our SMB customers.’ said Marvin Blough, SonicWall vice president of worldwide sales, in an e-mail to CRN.

’Our VAR Advisory Council, in a call last week reviewing the Thoma Bravo announcement, did not share that perspective," said Steve Franzese, SonicWall vice president of worldwide marketing, in an e-mail to CRN. "We are all about 'business as usual which, in our case, has both an SMB and an enterprise component.’

Next: Partners Express Concerns About Enterprise Expansion

And most SonicWall partners say that Thoma Bravo wouldn't likely do anything to dismantle or sabotage the channel once the acquisition was complete in light of the fact that the investment firm shelled out a hefty premium for its purchase.

"I don't see (Thoma Bravo) doing much of anything as far as limiting or thinning them, or going direct. I wouldn't see that happening," said Ron Culler, chief technology officer for Secure Designs, a Greensboro, N.C.-based MSSP.

"If something happened I'd be really, really surprised. (SonicWall) supports the channel and the channel is their army," he said adding that it would be "crazy" for an outside investor to come in and move them away from their channel base.

All in all, SonicWall channel partners say that Thoma Bravo's impending acquisition would likely be a good move for the Sunnyvale, Calif.-based networking security company. If anything, they say, the money would give the company secure financial backing for innovation and marketing, while freeing the company up to focus on its enterprise expansion without having to answer to Wall Street.

However, while SonicWall is financially solvent, its SMB solution providers are starting to question the company's long range plans going forward, maintaining that it will still be under pressure to expand upward and maximize profits to provide a strong ROI for Bravo investors.

"(The acquisition) is going to release a lot of burdens. The strategy is maybe that they have some underlying ideas in technology that they think that they can do better with and take to market quicker as a private company and really start to take a run at some of these big competitors like Cisco," said Monte Robertson, CEO of Software Security Solutions, a Lakewood, Colo.-based solution provider. "It's unfortunate. Everyone wants to go after the big guys. It's unfortunate because our (company's) focus is taking care of the little guys. They're the ones that need the help the most," he said.

Next: SonicWall Partners Weigh Partnership

And other channel partners echo that lately the majority of SonicWall's marketing efforts have focused on enterprise products and news.

"All of their press center announcement are really geared toward competing with Cisco," said Richard Hyde, sales director for Whitehall, Penn.-based EZMicro. "There are not as many marketing materials for the small business as there were three years ago."

For the most part, Hyde said that he felt confident that SonicWall would remain a channel-focused company with solid products, "as long as this buyout doesn't make that get any worse," he said.

"We have no problem selling any of the SonicWall appliances. It's still a great value. I just don't think they have enough public relations supporting (the SMB), something that has been the key factor of their growth," he said.

Then again, Robertson speculated, the impending acquisition could also take some of the financial burden off of SonicWall and better enable them to put more resources into the SMB without having worry about placating enterprise focused investors.

"The pressure might not be there to have to up market. But we're just looking into the glass ball -- there's a number of ways it could go," Robertson said. "SonicWall was our choice so far. There are other (products) on the market that are really strong now. There're other competitive products that are really focused on small business markets, and they're looking kind of favorable."

"Of course everyone is trying to grasp at the brass ring," Robertson said, "but not everyone can grasp the brass ring."