Content security vendor Irdeto has acquired Cloakware, a privately held application security company, for $72.5 million.

The acquisition gives Irdeto, which develops content security software and digital rights management technology for entertainment applications, a foothold in the nascent source-code security market. Products in this niche of the application security industry help software developers protect their source code from reverse engineering and software piracy.

Diana Kelley, vice president and service director for security and risk management services at the Burton Group, told SCMagazineUS.com that she was surprised at the $72.5 million that Irdeto, a subsidiary of multinational media group Naspers, paid for Cloakware, which has offices in Ottawa, Canada, and Vienna, Va.

"It's an area where vendors haven't focused, and when you look at the application security space, there's been a slow adoption curve of various technologies,” she said.

Doug Lowther, vice president of sales and marketing for Irdeto, told SCMagazineUS.com that the acquisition is a logical step for the Netherlands-based company, as Irdeto has been a Cloakware customer since 2004. Cloakware's core software technology – the Cloakware Security Suite – ensures that only individuals with proper license rights can access digital content, such as music, videos and games.

"That makes it more difficult to reverse engineer or hack our software,” he said. "It enables us to deliver more highly secure systems with lower hardware costs," he added.

The technology is particularly important to Irdeto's customers, including TV providers in India and China, where network deployment costs are high, but subscriber revenue is low.

"There's a lot of pressure on costs in those markets, so Cloakware's software allows us to meet those requirements in a more cost-effective way," Lowther said. "After working with Cloakware for three years, we realized they had a unique differentiating technology. We saw it as fast growing and felt it was complementary to put the capabilities into one company."