Secure Computing to buy CipherTrust

Competitors see an opportunity as companies merge, saying that federal customers will be uncertain of the new entity's future.

Secure Computing has agreed to acquire messaging security vendor CipherTrust in a transaction worth $273.6 million.

The combination will bring together Secure Computing’s universal threat management and firewall products with CipherTrust’s line of messaging security appliances. The companies expect the deal to close by Sept. 8, pending regulatory approvals. The combined company will operate as Secure Computing.

Both companies have a presence in the federal market. Jay Chaudhry, chief executive officer, chairman and founder of CipherTrust, said about 8 percent to 10 percent of the privately held company’s business is in the federal sector. Federal business accounts for as much as 24 percent of Secure Computing’s revenue, Chaudhry said. Secure Computing had $109.2 million in revenue in 2005.

Chaudhry, who will become vice chairman and chief strategy officer at Secure Computing, said the combination provides an opportunity to expand in the government space. In marketing channels, the companies want each of their partners to carry both companies’ product lines, he added.

Chaudhry said the companies’ products have no overlap. “Many times, the product lines of acquired companies suffer and disappear,” he said. But the merger with Secure Computing “doesn’t impact CipherTrust’s product line at all."

CipherTrust offers appliances to secure enterprise e-mail and instant messaging systems and also markets a compliance product for outgoing e-mail messages. In addition to firewalls, Secure Computing offers secure content management and identity and access management products.

Tom Gillis, senior vice president of worldwide marketing at IronPort Systems, a CipherTrust rival in the messaging security appliance market, sees an opening for IronPort in CipherTrust’s pending acquisition.

“This acquisition absolutely provides an opportunity for IronPort to gain additional share in the federal market," he said. "The federal space isn’t going to go with a Secure Computing/CipherTrust combo when the longevity of the product and company is in question."

The Army uses IronPort’s e-mail transfer agents in its Army Knowledge Online Web portal. The company’s technology is also part of EDS’ Navy Marine Corps Intranet contract.

Richi Jennings, lead analyst at Ferris Research’s e-mail security practice, said the acquisition may give IronPort and other appliance competitors a short-term advantage, but he doesn’t think the deal will give rivals a lasting edge.