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Symantec Charts New Path with $4.6 Billion Bid for Blue Coat

Looking to revive its struggling IT security business hampered by miscues and a tapped out market for its flagship endpoint security offering, Symantec Monday said it has reached an agreement to acquire Blue Coat, a provider of Web analytics, threat assessment and remediation software and services, for $4.6 billion. Blue Coat CEO Greg Clark will take the helm at Symantec once the deal closes. As part of the deal, Blue Coat majority shareholder Bain Capital will reinvest $750 million in the combined company and Silver Lake Partners is doubling its investment to $1 billion.

The deal, set to close next quarter, would be the largest for Symantec in more than a decade, though it is paying a high premium for Blue Coat, which had $598 million in revenues for its latest fiscal year, though it had just filed for an initial public offering (IPO).

Experts say acquiring Blue Coat, which claims 15,000 customers including 75 percent of the Global Fortune 500, should further propel Symantec into the threat analytics market after it pulled its Web security offering last year in a move to cut costs. Blue Coat had just recently filed an initial public offering (IPO), which it has now pulled. Others wonder if a successful integration of the two companies will be enough to rejuvenate the leadership position Symantec once had as an IT security provider. Bob Phelps, managing director for security services at Accenture, said Symantec is playing catchup with companies such as FireEye and Palo Alto Networks, among others. "Symantec's problem has been their cash cow business is going away, they have not had good management and they have not integrated companies together effectively," he said. Observers also said Symantec has experienced significant drain of executives such as Jeff Scheel, senior vice president of corporate strategy, who  left to join Ionic Security, a startup which earlier this month pulled in $45 million in funding from Amazon and Goldman Sachs. In late April, Symantec CEO Michael Brown unexpectedly stepped down after less than two years on the job after reporting a projected falloff in sales.

Having spun off its Veritas backup and recovery business, Symantec is making a huge bet on Blue Coat, a rapidly growing provider of both on-premises and cloud-based security analytics tools, which the company claims are used by more than 70 percent of the Global Fortune 500.

Blue Coat's Secure Web Gateway, which includes ProxySG, provides user authentication, Web traffic filtering, cloud application monitoring, data loss prevention and threat prediction as well as visibility into encrypted traffic. ProxySG works with Blue Coat's Content Analysis System, which provides static code analysis and sandbox brokering. Blue Coat says the system also offers web and threat intelligence from 15,000 of the largest global enterprises. The company claims more than 70 percent of the Fortune Global 500 use the gateway, which has a broad feature set to authenticate users, filter Web traffic, identify cloud application usage, provide data loss prevention, deliver threat prevention and ensure visibility into encrypted traffic.

Blue Coat's security analytics appliance, the Solera Networks DeepSee recorder for forensics, deep packet inspection and on-demand session replay will bolster Symantec's late entry into the threat detection, remediation and forensics arena, according to an IDC research note. The addition of Blue Coat could pit Symantec against IBM's Q-Radar Security Intelligence Platform and the RSA Security Analytics platform in the threat detection, incident response and forensics investigations, according to IDC, though the firm warned that "these competitors have much greater traction and embedded customers today and will be hard to unseat."

In addition to Blue Coat's SaaS-enabled ProxySG, Blue Coat recently acquired Elastica and Netskope, which IDC believes would bolster Symantec's Web security and cloud security product offerings. "IDC views the Symantec acquisition with cautious optimism and believes this could be an opportunity to modernize the company's portfolio and compete strongly in this crowded market for large enterprise security deals," according to the large research note.

On a conference call with analysts Monday, interim President and COO Ajei Gopal rationalized the deal. Citing a 125 percent increase in the number of zero-day attacks, a 55 percent rise in sphere-phishing attempts and a continued surge in ransomeware campaigns, Gopal claimed the combined company will give the Symantec "best-in-breed" protection against those threat vectors both on-premises and in the cloud.

"With Advanced Threat Protection capabilities from both companies, we will be able to detect and remediate the most sophisticated cyberattacks," Gopal said. "Not only will the combination of our products deliver comprehensive cyber defense, but our best of breed products will also individually get better."

Gopal said that will be achieved by the data Symantec now collects and analyzes via 175 million endpoints via Symantec Endpoint Protection, 2 billion e-mails scanned daily and from millions of physical, virtual and cloud workloads it protects. For its part, Gopal noted Blue Coat also collects and analyzes more than 1.2 billion new Web requests secured per day through Secure Web Gateway and over 12,000 cloud applications monitored and protected through its Cloud Access Security Broker.

"Symantec and Blue Coat collect different and complementary data sets," he added. "Taken together, we will have unmatched visibility and data about the global threat landscape. We believe combining these two massive data sets enables Symantec to deliver unparalleled cyber defense. As more enterprises embrace the cloud, they need to secure their users, data and applications wherever they reside. Previously that would have taken over eight to ten point vendors to provide the security capabilities needed."

Posted by Jeffrey Schwartz on 06/15/2016 at 12:13 PM


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