As reported in Reuters and Globes:
IBM, the world’s biggest technology services company, said on Thursday it has agreed to buy Trusteer, a company that helps businesses fight computer viruses and fraud. A person familiar with the matter said IBM was paying close to $1 billion for Trusteer, making it the company’s second-largest acquisition of a security company after its 2006 purchase of Internet Security Systems for about $1.3 billion.
Trusteer has for several years been recognized as a leading company in the web fraud prevention market. After, earlier this year, RSA, the security division of EMC, bought rival Silver Tail, which is considered the company closest to Trusteer in technological capability, it was clear that the giant computing companies, which have almost no presence in this area, and the big money, would pay attention to Trusteer.
“Beyond the aspect of the returns to the shareholders, we saw a very special opportunity here,” Trusteer CEO Mickey Boodaei explained today. “IBM sought to set up a research laboratory in security, identified the potential of Israel, and wants to have a large presence here for building a platform for information security products as part of a new security division formed in 2012. We were very attracted to the opportunity of them establishing this capability in Israel and not somewhere else. We started to talk to them about it, to understand what they want to do, and we found a synergy between what we do and IBM’s path, and it seemed right. As far as the shareholders are concerned, the driver was to set up in Israel IBM’s biggest security lab, to develop it further, to leave a legacy behind us.”
“A good deal all round”
The importance of the deal for IBM can be conveyed through two fetaures. The first is the secret, semi-royal visit of IBM CEO Ginni Rometty to Israel this week. Almost no details were released of the reason for the visit and its schedule, and IBM refused to respond to enquiries about it, which is unusual behavior in relation to a visit of so important a personage. The reason for the visit is apparently not the acquisition, and Rometty’s signature is not required on the check, but in IBM they will exploit the timing in order to let the CEO see the new asset she has bought here.
The second outstanding feature is the conditions of the deal. In general, in the case of companies that already have a record of business achievement and an aggressive growth forecast factored into the price (the company’s 2012 sales are estimated at $70 million, it sees $100 million this year, and it has been profitable for some time), some of the consideration is defined as an earnout. In the current deal, there are no milestones that need to be met in order to increase the deal amount, milestones that, as has been demonstrated more than once in start-up acquisitions, can be no trivial matter. “There were negotiations that answer all expectations,” says Boodaei, “and I feel that that applies to both sides. Everyone’s happy and everyone’s smiling, so I believe that this is a good deal for all concerned.”
This is IBM’s thirteenth acquisition in Israel in fifteen years, and the company employs some 2,200 people locally, half of them in R&D. Trusteer’s activity will add to IBM’s existing security research operation here.
Trusteer is being acquired for its capability in responding to security needs of financial services users, but, from a technological point of view, both companies are aiming much higher. For some time, anti-virus programs have not provided the solution required for true end-user protection. The inadequacy of veteran security technologies in the face of today’s challenges, that include sophisticated attacks undetectable until they happen, makes a different approach imperative.
Trusteer, thanks to its presence on a large number of end-user points, and its ability to examine any anomaly in the behavior of a computer, provides a solution that can also cope with unidentified threats and block them. In the past, Trusteer’s way of operating, which includes installation on each computer, was seen as a limitation, because it makes life harder for the user. But the company learned how to carry out the installation smoothly, and, ironically, what had been considered a disadvantage became, according to Boodaei, an advantage as far as IBM’s plans were concerned. “Our expertise on the end-user side,” he says, “was attractive to IBM. The ability to support enterprises with 50-100 thousand terminals, without disturbing the enterprise computer network, is our specialty, and is critical in approaching the enterprise sector.”
Published by Globes [online], Israel business news – www.globes-online.com – on August 15, 2013