Proofpoint has been
increasing its messaging security capabilities with strategic acquisitions. The
company acquired Abaca Technologies and Armorize Technologies in mid-2013.
These acquisitions enhanced the company’s Targeted Attack Protection (TAP)
solutions by bringing in next-generation threat and malware-detection
technologies. Continuing its expansion, Proofpoint acquired Sendmail Inc., a
messaging technologies provider to enterprises, in the fourth quarter of last
year.
The acquisition gave
Proofpoint ownership of “Sendmail Messaging Transfer Agent (MTA)” on which the
company’s Proofpoint Enterprise Protection™ solution is based. This will enable
the company to optimize its Proofpoint Enterprise Protection™ solution further
to meet the needs of cloud messaging architectures and security requirements.
Sendmail is expected to add around $5 million to the revenue of Proofpoint in
2014. Apart from that, the acquisition will open Sendmail’s customer base to
Proofpoint’s other message security solutions such as TAP. Proofpoint can
cross-sell its security solutions to Sendmail customers which should increase
the company’s revenue in the coming quarters. The addition of new technology
will also increase the competitiveness of the company in the message security
market.
Other players in the
security market are also following this acquisition strategy. FireEye (FEYE), a
leader in advanced threat protection, has recently acquired Mandiant for $1
billion. Mandiant provides advanced endpoint security products and
security-incident management solutions. The acquisition has enhanced the
company’s advanced threat-detection capabilities in email, web, content, and
data center security platforms. FireEye has become a major competitor of
Proofpoint in message security following Proofpoint’s acquisition of Armorize
Technologies. With FireEye’s Mandiant acquisition, competition will intensify
in the message security market.
The SaaS message security
market is expected to grow at a CAGR of 10.3% and reach $1.1 billion by 2017,
from $667 million in 2012. Proofpoint’s acquisitions in the last six months
will help the company in this fast-growing message security market. Further,
the company’s strategy of acquiring smaller players may continue in the near
term, as the company recently raised $201.25 million by issuing 1.25%
convertible senior notes due in 2018. The company expects to use the proceeds
on corporate functions, acquisitions, and other strategic transactions. This indicates
that the company may continue its acquisition strategy in the near term to grow
its customer base and acquire new technology to improve its competitiveness.
Growth opportunity for
archiving solutions
Owing to the growing usage
of social media by organizations, archiving social media communications has
become an important part of managing corporate information risk. These
organizations are also required to capture the content and store it for a
certain time as mandated by regulatory bodies such as SEC and FINRA, which is
driving the demand for archiving solutions. The major growth in the archiving
solutions space is expected to be driven by cloud-based archiving solutions. It
is expected that 60%-70% of archiving will be cloud-based. Proofpoint will
benefit from this growth and is expanding its archiving solutions.
Proofpoint’s “Proofpoint
Archiver for Chatter” will deliver archiving solutions to selectively capture
conversations in salesforce communities. The selective capturing of
communications from salesforce communities will help organizations store the
data and content associated with these communications. This will help companies
manage the information risk associated with social media in addition to
complying with regulatory mandates. Furthermore, the market for archiving
solutions is expected to have a CAGR of 7.8 % and reach $2.1 billion by 2017,
with major growth from cloud-based archiving solutions. Proofpoint should
benefit from this growth as the company specializes in only cloud-based archiving
solutions.
Conclusion
Proofpoint reported revenue
of $137.9 million for 2013, beating its earlier guidance of $132 million to
$133 million. The company is poised for similar growth in the coming quarters.
The acquisitions in 2013 will help the company to grow the SaaS messaging
market. Also, the expansion of the company’s archiving solutions will help it
increase revenue with the growing archiving market.
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