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With latest private equity deal, Sophos says it's 'here to stay'

According to one industry analyst, the recent Sophos deal with Apax Partners should ease the minds of partners who think the company may be acquired.

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Chris Doggett reviews the basics of the Sophos channel program.

This week's move by Sophos Inc. to sell its majority interest to the global private equity firm Apax Partners should demonstrate to partners and customers that they don't have to worry about the endpoint security and antimalware company being swallowed up and acquired, according to an industry analyst and Sophos leaders.

Chris Doggett, vice president of global channels at U.K.-based Sophos Inc. and Arabella Hallawell, vice president of corporate strategy at Sophos, said the $830 million private equity deal will present opportunities for the U.K-based company to continue its 100% channel offerings and develop them further, including geographic expansion where the opportunities present themselves, endpoint security technology enhancements, support for virtualized platforms and Software as a Service implementations and possible growth of its portfolio through acquisitions or in-house builds.

"We now have a very strong backbone and a lot of resources that can be used to make significant investments in the channel," Doggett said.

As for those resources -- funds under the management of Apax Partners total approximately $40 billion globally.

"In terms of the bottom line, this gives more certainty to partners," Hallawell said. "We've got a committed partner…we're here to stay and get even bigger and even better."

When private equity firms take on a company, it's not uncommon for the firm to sell off the acquired company's assets one by one. Jon Oltsik, senior analyst at the Milford, MA-based analyst firm Enterprise Strategy Group, wouldn't be surprised, however, if Sophos avoids the "chop shop" and instead sets up to acquire other companies.

This week's deal was announced just a day after Symantec made a deal to acquire GuardianEdge -- yet another example of an independent endpoint security company and encryption vendor merging.

"The market has dictated that those two pieces [endpoint security and encryption] belong together. It wouldn't make sense to pull [Sophos] apart and divest," Oltsik said. "Sophos has a really good base with both products. The logical thing would be to build on top of that."

Pieces of Sophos' acquired technologies, like Utimaco Safeware Inc.'s DLP and encryption features or EndForce Inc.'s NAC capabilities, are embedded into the company's core endpoint security product. According to Oltsik, the sum is greater than the parts, and each component is not as valuable as its own standalone asset to be sold.

Oltsik imagines that Sophos could go in various other directions with acquisitions, including lightweight DLP, network security or some kind of identity play. "The market's pretty open. All the security companies are doing pretty well, and there is a lot of room for expansion."

Sophos, in a press release, reported it had revenue in excess of $260 million as of March 31, the end of its fiscal year.

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