Thursday, June 18, 2009

If you were Check Point, who would you buy?

I gave this feedback to a senior editor at MergerMarket. Since they provide a subscription service I thought it would be interesting to also dream about Check Point M&A here.

Check Point is an interesting company with a healthy revenue stream, big bank account, and dominant market position. They haven't shown a great desire to grow by aquisition in the past, and the vision of the Zone Labs and Nokia deals doesn't particularly wow me. Still, they can print money so they're clearly doing a lot of things right!

Check Point Software Technologies is a software company specializing in network inspection and processing. I would think the first wave of merger activity would be to diversify from security into adjacent areas of networking. If you think about it, a firewall's job is to let traffic into the network so I tend to think Check Point can better use its checkbook to improve connectivity for its customers.Here are three areas I would recommend for Check Point corporate development:

WAN optimization. Performance over the Internet is critical to capturing new customers and improving business processes. Riverbed would be the number one target. RVBD would allow Check Point to combine security features with web access, accelerated storage, and more. Check Point is good at terminating WAN connections so this is a natural fit.

Virtual Desktop and Virtual Machine delivery. Virtualization will continue penetration in the datacenter and we will see more enterprises solving labor intensive endpoint complexity and security problems with virtualization. Picture a remote user connecting by VPN through a firewall to a network server to run or download a virtual application. Most of the companies in this space are small, with software implementations that Parallels and perhaps the smaller MokaFive and Ring Cube. It would be bold and cool if they could scarf up Citrix but I'm not sure that Checlk Point's pockets are that deep.

Network Management. An under-appreciated strength of Check Point is its management capability. The company gets great stickiness and loyalty from its base that shies away from command line interpretters and script-writing. The trick is to combine mergers in this area with WAN optimization of virtualization. I would look towards companies like Reflex Systems, DynamicOps, or FastScale to allow organizations to quickly take advatage of a compelling Check Point infrastructure. Those are tiny companies - I'm sure there are public ones that also fill this bill it is just too late for me to think of them ;)

I'm not big on Check Point acquiring hardware capability (e.g. Crossbeam) because Check Point is a software company and it is difficult for hardware product lines to thrive in a company with a software DNA - just look at McAfee's history with hardware. I also don't think it makes much sense to commoditize adjacent security vendors (been there with Sourcefire, and what does it really add for customers that can't be done through parternships?). Though maybe they'll score Imperva to get Shlomo Kramer back in the fold or put Code Green on one of their software blades.

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