Deal: McAfee acquires Reconnex

As predicted, the DLP market continues to consolidate on it's way to eventually disappearing. McAfee announced as part of their earnings release that they are acquiring Reconnex for $46 million in cash. This is a good deal for McAfee for lots of reasons. I don't think they are going be "redefining the data protection market" as stated in their press release - but there are positives.

1. All the cool kids have one - McAfee needed to bolster their DLP position because their benchmarks, Symantec, Trend, EMC/RSA, and Websense, already acquired assets in this space. They also realized the endpoint centric product they've brought to market (based on the Onigma acquisition) wasn't going to get them there. Reconnex is one of the last independents standing, so it's not a surprise they got taken out.
   
   
2. DLP is a feature - As I've mentioned, DLP is not a market category that is going to stand alone. These capabilities need to be built into bigger security, and eventually general IT infrastructure. McAfee now has some more technology to foster that kind of integration and value add.

Of course, all that glitters is never gold, so there are some things to watch for, especially around channel mismatch. McAfee doesn't really have a high end services/implementation business to drive big DLP implementations. And their channel tends to focus more on mid-sized companies. Sure they do some big deals (around endpoint security and some IPS), but there could be a bit of an impedance mismatch when the reality of DLP deployment cycles sets in.

How about that price?

But any potential issues with the deal are offset by the price. $46 million in cash. Wow! That is really a fire sale price for a company with seemingly a lot of momentum. I guess seemingly is with a capital SEEMINGLY.

Reconnex had raised $37 million in VC funding. So the VCs get their money out, the management team (mostly executives) maybe gets a little carve out, and the rank and file get screwed. Of course, that is speculation on my part, but having seen enough of these deals - I'm probably not too far off.

This is just yet another example of the reality that you cannot believe all your read. Check out the momentum release from TWO WEEKS ago. If you take the words on the surface, things are going great. Lots of growth, named a leader in that quadrant thingy, yada yada. The print isn't even dry on that release and they sell for not much more than DeWalt's expense account.

I'm sure there is some kind of back story here, and I'm sure it's not real pretty. But at the end of the day, they got a deal done. Bully for them. And once again, McAfee shows it's one of the shrewdest buyers in the space. They won't have to turn many Reconnex lemons into lemonade to make the deal pay big time.

Photo credit: "Cheap Store" originally uploaded by ZannaLyon