Spam Control Market Consolidation Continues — Cisco Buys IronPort

Today, Cisco announced that it has acquired IronPort Systems for $830 million in cash and stock. Cisco's offer should make the investors happy. It's a fair and good price. It should also stimulate strong IronPort growth.

Cisco is, of course, well-known for its "growth by acquisition" strategy, and was notably lacking in solutions for email hygiene. It makes sense for it to buy an appliance vendor. It also makes sense for IronPort. Despite having good technology, the company has consistently had difficulty achieving and maintaining profitability. We estimate IronPort's revenues have hovered around in the $50M-$75M mark for some time, which must have been frustrating for investors. IronPort has 408 employees.

IronPort had hoped to go public over the last couple of years; given its financial performance, the acquisition route makes much better sense.

IronPort and Ciphertrust have been the appliance market leaders for some time (albeit challenged by the appliances launched by large, conventional software vendors such as Sophos and Symantec). Ciphertrust was bought by Secure Computing in 2006, thus leaving Cisco with an obvious choice.

Will we look back at 2007 as the year of spam control market consolidation? We've certainly seen some significant M&A activity in previous years, but there's still plenty of scope for your vendor to be acquired or run out of VC money.

...David Ferris and Richi Jennings

[Edit: it's $830m, not $850m as we were originally advised by IronPort]

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