Thursday, August 24, 2006

Hit #112

Internet Security Systems (ISSX) is being bought by IBM for $1.3 billion in cash. The offer, of $28/share is a premium of 88% over my average cost per share of $14.9/share.

The premium over the recent close was surprisingly small. This is overall a good acquisition for IBM as the one thing it was lacking in its management/monitoring story was network security.

This acquisition will put pressure on HP to react. Will HP go after Symantec ? I should reword that - can HP afford not to ?

McAfee (MFE) may end up as the loser in the coming free for all, though a merger with Trend Micro (TMIC) does make sense to bulk up against Symantec.

With EMC's recent purchase of RSA Systems the two top companies have been taken out. Verisign, the big security player, and that does much much more than monitoring, will remain a standalone player.

Smaller companies like WebSense (WBSN), Blue Coat Systems (BCSI), Secure Computing (SCUR), Aladdin (ALDN), SonicWall (SNWL) and Safenet (SFNT) will all be part of a consolidation wave in this sector. Many of these are going for bargain prices right now.

Previous hit - FileNet (#111)


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