Data Security, Encryption, Malware, Network Security

Sophos sells majority stake to private equity group

A private equity firm has purchased a majority interest of Sophos, one of the world's largest pure-play security vendors, for $830 million, the companies announced Tuesday.

Sophos founders Jan Hruska and Peter Lammer will retain a minority stake in the company.

The decision to sell the 25-year-old Sophos to Apax Partners now squashes plans for Burlington, Mass.-based firm to launch an initial public offering, as the company had planned to do this year in the United States, according to published reports. Sophos, whose headquarters are in the U.K., also had planned to IPO on the London Stock Exchange in 2007, but decided against it.

Sophos, which has more than 100 million users across 150 countries, is unique in that it caters exclusively to businesses, with a strong lean toward mid-size organizations.

The company has a strong balance sheet. Sophos, best known for its malware protection and encryption offerings, earned more than $260 million in revenue in fiscal year 2010, compared to $213 the prior year.

"Apax's financial backing, combined with Sophos' deep understanding of security and data protection, is great news for our customers, prospects and partners," Sophos CEO Steve Munford said in a statement.

"We identified the security software space as an attractive investment area for us given its rapid growth driven by ever increasing malware threats and high barriers to entry," Salim Nathoo, a partner at Apax Partners, said. "Sophos is a very strong platform and is gaining market share."

Peter Firstbrook, research director at Gartner, where he covers the endpoint security market, said the purchase appears to be a move by Apax to use Sophos as a foundation to amass security technologies. Sophos, meanwhile, obtains financial backing and can make strategic decisions without being beholden to shareholders, as would be the case if the company went public.

However, the downside could come in the form of less transparency, Firstbrook said.

"I don't know what their (Apax's) strategy is or whether it aligns to where the market is going," he said.

Regardless, the purchase doesn't "hurt customers at all," Firstbrook added.

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