Analyst Walter Pritchard of San Francisco investment firm Cowen and Company said: “It’s tougher now for start-ups in the IT security space as bigger players such as Google, Microsoft and EMC have come to dominate. This is a big change from five years ago with large vendors vying for best of breed leadership”.
However, he added that new opportunities for smaller players would come from computing platform shifts, the emerging focus on data security and compliance needs.
Symantec, whose CEO John W. Thompson made a bullish keynote on the opening morning of the conference, was criticised. “Symantec needs to get its act together. It is vulnerable in the retail market, especially from European competitors such as Kasperksy and its R&D is not in great shape. That’s the result of being a serial acquirer” said Pritchard.
Rival McAfee was less exposed in the retail space after diversifying onto the web but could still find itself the target of an acquisition and may not survive as a standalone company in the next three years, according to the analyst.
Maria Lewis Kussmaul of investment house America’s Growth Capital said that the sector would continue to see vigorous M&A in the year ahead but that IPO activity, which “returned in force in 2007”, looked less certain for 2008 as many IPOs had significantly underperformed.
“Sourcefire is down 61% from its March offering and ArcSight is down 3%”, she said, adding that potential IPOs in 2008 might include Qualys, Fortinet, PGP and BigFix. She listed SaaS, ID Theft and “anything to do with compliance”, as spaces of most interest to investors.