Network security firm to be sold

Israeli company to buy Sourcefire

October 07, 2005|By WILLIAM PATALON III | WILLIAM PATALON III,SUN REPORTER

Sourcefire Inc., a Columbia developer of hacker-prevention technology for computer networks, will be acquired by network security leader Check Point Software Technologies Ltd. in a deal valued at $225 million, the two firms announced yesterday.

The state of Maryland and a local venture capital firm are poised to be big winners when the deal is consummated late this year or in the first quarter of 2006.

The Maryland Venture Fund, which invested $550,000 through its Enterprise Investment Fund in February 2002, will receive a payout of nearly $4 million, said Elizabeth R. Good, the fund's managing director.

"We are absolutely ecstatic" about the deal and a return of better than sevenfold, Good said.

New Enterprise Associates, which has offices in Virginia and Maryland as well as on the West Coast, had invested roughly $8 million in Sourcefire, but the company declined to say how much it made on the deal.

Publicly traded Check Point, with international headquarters in Israel and its U.S. base in Redwood City, Calif., is a leader in security products for computer networks - particularly firewall software, said Peter Christy, principal analyst for Internet Research Group in Los Altos, Calif. Sourcefire's technology detects hackers and other unwanted users of computer networks.

Because so many of today's corporate networks are accessible to users outside the company - including vendors and customers - Check Point needed Sourcefire's technology to remain among the industry leaders, Christy said.

"It's huge," Christy said of the importance of the deal.

Privately held Sourcefire has 140 workers, including 109 in Maryland. Check Point intends to leave Sourcefire's Maryland operation largely intact, said Gil Shwed, Check Point's chairman and chief executive officer. The deal is subject to regulatory review.

Company officials declined to provide details of Sourcefire's financial performance. However, Shwed said that Check Point executives have estimated to analysts that Sourcefire will account for 6 percent to 8 percent of Check Point's revenue next year.

Analysts have forecast Check Point's revenue to be $650 million, meaning Sourcefire may produce $39 million to $52 million.

Shwed said the two companies started talking several months ago.

As those talks turned into negotiations, "We could see just what a great cultural and [strategic] fit we were," said Wayne Jackson, Sourcefire's chief executive officer.

Sourcefire was founded in 2001 by entrepreneur Martin Roesch. Harry Weller, managing director of New Enterprise Associates, who worked directly with Sourcefire, said the company succeeded due to Roesch's innovations and willingness to bring in other people to help him make his idea commercially viable.

"It's a good fit, a great deal," Weller said. "But I'm going to miss working with them."

bill.patalon@baltsun.com

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