Key reasons Symantec Acquired Blue Coat Systems

Its already a done deal folks! In a bid to redefine the future of cyber security, this deal worth $4.65b, was consummated a while ago. 

Symantec, the maker of Norton security services, agreed to buy security hardware, software, and service provider Blue Coat in an all-cash deal. Blue Coat, which was acquired by Bain Capital for $2.4 billion last year, had filed to go public earlier this month.

According sources, Blue Coat revenue fell 5% to $598.3 million in the fiscal year ending on April 30 due to deferred revenue writedowns related to Bain's takeover. This means that Symantec is paying a hefty premium for Blue Coat at nearly 8 times sales. But aside the financials, there are key business and sundry decisions that led Symantec to shell out such a huge sum. 

Acquiring Blue Coat is projected to add over 15,000 enterprise customers to Symantec's current customer base of around 370,000 clients. Symantec claims that the acquisition will combine its "leading threat telemetry with Blue Coat's networks and cloud security offerings" to protect servers, emails, and web transactions. Simply put, Symantec needs Blue Coat because its core antivirus business has been dying a slow death over the past decade. Two years ago, a Symantec executive declared that traditional antivirus solutions were "dead" due to the rise of sophisticated attacks that rigid antivirus solutions couldn't keep pace with. Moverover, the rise of mobile and connected devices enabled hackers to attack anything with an active Internet connection.

Symantec's core security products protect PCs, data centers, and emails. Blue Coat's products protect networks and cloud services, so the two companies' businesses don't really overlap. Symantec claims that the combination of those services in end-to-end packages will enable it to protect a wide range of platforms which would typically require "eight to ten" different security vendors. The acquisition will also give Symantec a combined staff of 3,000 engineers and researchers to better counter hackers worldwide.

Symantec hailed the deal as a good match and IDC analyst Chris Christiansen agreed, saying the companies' products "don’t have much overlap.” Symantec has typically focused on device, or “endpoint,” security, while Blue Coat has specialized on the networking side, including managing encrypted traffic. By joining forces, Symantec said it can offer a whole range of products, promising better overall security and threat detection.

Every day, the vendors collect vast amounts of data on the latest threats. For Symantec, that means analyzing billions of emails and watching millions of PCs; for Blue Coat, it means monitoring thousands of cloud-based applications and over a billion Web requests through secure gateways. Combining resources should give them a better view of where and how malware is attacking their clients. 

Also as hackers continue to innovate, Symantec needs more engineers to keep pace. The acquisition will result in a combined staff of 3,000 engineers and researchers, to help it stay ahead of the bad guys. For its business clients, Symantec says it will be able to protect everything from devices to cloud applications.

Additionally, the acquisition could inject some sales growth for Symantec at time when its business has been limping. In April, then-CEO Michael Brown stepped down following poor financial results and amid growing competition. To drive sales, Symantec hopes to sell its products to Blue Coat customers, and vice versa. Symantec has around 370,000 enterprise clients, while Blue Coat has 15,000.

Although Symantec remains a leader in security, the company has been restructuring in a bid to improve profitability, Christiansen noted. Last year, Symantec decided to sharpen its focus on security and sold its information management business, Veritas, for $8 billion. This latest deal with help it beef up again while still focusing on security.