McAfee Acquires MX Logic: Quick Response

THIS IS A QUICK RESPONSE BULLETIN. PLEASE POST COMMENTS/CORRECTIONS/ABUSES BELOW. IF YOU WANT ANONYMITY, EMAIL DAVID.FERRIS@FERRIS.COM. McAfee announced it will acquire hosted security vendor MX Logic: MX Logic has hosted virus and spam control and malware control for email and Web, plus email archiving. Company has grown revenues by 20% annually over the last few […]

THIS IS A QUICK RESPONSE BULLETIN. PLEASE POST COMMENTS/CORRECTIONS/ABUSES BELOW. IF YOU WANT ANONYMITY, EMAIL DAVID.FERRIS@FERRIS.COM.

McAfee announced it will acquire hosted security vendor MX Logic:

  • MX Logic has hosted virus and spam control and malware control for email and Web, plus email archiving.
  • Company has grown revenues by 20% annually over the last few years; has been at break-even profitability for the last six months.
  • McAfee is building a hosted security service.
  • This is the final nail in the coffin for McAfee's OEM relationship with Postini.

Interesting strengths that MX Logic brings to table:

  • Growing and strong reseller channel.
  • Inexpensive pricing.
  • Friendly platform that lets resellers and end customers do self-provisioning.

Deal terms:

  • McAfee paying $140M plus $30M earnout.
  • Ferris Research estimates MX Logic prior 12 months revenues at $38M.
  • So assuming total payment of $160M, that's a middle-of-the-road multiple of 4.2. Not the riches of Croesus, but a lot better than a poke in the eye with a sharp stick.

Other comments:

  • MX Logic's main competitors were/are Frontbridge (acquired by Microsoft in 3Q05), Postini (acquired by Google in 3Q07), and MessageLabs (acquired by Symantec in 4Q08).
  • For detailed analysis of the Symantec/MessageLabs transaction, see Ferris report, or listen to our webcast.
  • MX Logic was the only substantial first-generation hosted email/Web security vendor left. There are interesting version two players such as MIMEcast.
  • McAfee has found it hard to develop its own hosted offering, as has its main competitor, Symantec.
  • Trend Micro will now feel a lot of pressure to make its hosted security offering more visible.
  • Montgomery were advisers to MX Logic on the deal.

ALL COMMENTS/FURTHER INPUT WELCOME, YOU CAN SEE AND POST RESPONSES TO THIS BULLETIN BELOW.

... David Ferris

One Comment

  1. Posted July 31, 2009 at 5:12 PM | Permalink

    Another point: with a price/rev ratio of about 4, this is quite a lot below comparable transactions we’ve seen–ratios of 8 to 12 were more common. Part of this discount can perhaps be attributed to the recession

  2. Posted July 31, 2009 at 6:40 PM | Permalink

    One thing worth noting is that MXLogic – like Postini – uses a “real-time” proxy approach when filtering email. This approach reduces their operating costs by eliminating the necessity to drop email messages to disk while they are being scanned. We are not aware of any other service providers currently operating a major email filtering service using this cost-effective technique.

  3. Posted July 31, 2009 at 9:20 PM | Permalink

    Anonymous post from a usually reliable source:
    “You are correct that they just achieved break-even recently

    I’m sure you saw it will report into Marc Olesen (SVP of SaaS at Mcafee – very nice guy that I met a few months ago).On revenues, here’s what I’ve heard:
    * Mcafee said in the announcement that Q3 contribution to GAAP revenue would be $10 MM
    * Given a growing business, you probably would figure more like $30 – $35 MM trailing twelve months
    * If you use the $170 MM number, that puts the multiple around 4.9 – 5.6 x TTM revenue
    * For what it’s worth, I think MxLogic is a great team and they did a very nice job with the channel”

  4. Paul Fletcher
    Posted August 13, 2009 at 8:31 PM | Permalink

    In response to Ken’s comment, it’s also worth pointing out that Postini have a patent on this “pass-through” approach. For my money the patent is not worth the paper it’s written on, insofar as it’s basically just an smtp proxy, and so there is a lot of prior art (eg pix firewalls); but the USPTO works in weird and wonderful ways. It would be interesting to know whether MXL ever licensed this from Postini, or indeed it they were ever pursued by Postini. If not, maybe that could happen now that Mcafee have taken over and have some money to play with. But no doubt they did their homework first.

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