Sourcefire, a maiden in distress?
By John E Dunn | Published: 13:44, 02 June 2008
It’s flattering to have suitors, but it’s even more flattering to have suitors who can throw money around.
That’s probably explains why Sourcefire, owners of the famous Open Source Snort IPS system, aren’t swooning at Barracuda’s miserly $7.50 a share flirting session. Eyelashes aflutter: “They think we’re cheap!”
Here’s some news nobody at the company wants to hear: you are cheap. Sourcefire went public in 2007 – unfashionably late to the IPO party – and has been on a downward path ever since, not helped by a fight with Trend Micro over patents in acquired product, ClamAV . It loses money too.
It started to go into pear mode as early as 2005 when ‘deeply sinister Israeli security company’ – that’s Check Point to people who don’t work at the US Department of Defense (DOD) - tried to buy Sourcefire for $225 million. Sourcefire hadn’t made any money then, but Check Point’s CEO Gil Schwed remained confident, reportedly saying "It's getting profitable."
The DOD fretted about the deal and then killed it over national defence concerns. Sourcefire looked for a way out of the poverty problem, and came up with an idea that had once been king – have an IPO. That duly happened in March of last year at $15 a share.
Now barracuda reckons they can have their cake for half of that sum, which is still a premium over what the company has been trading at. Who wants to tell the shareholders the news? “The Board believes that the proposal substantially undervalues Sourcefire,” said Sourcefire’s Joseph Chinnici in a press statement sent out only hours after Barracuda’s approach.
There’s more to this than a romance that is stalling over the dowry. Barracuda wants to get its hands on the ClamAV gateway, which it already uses in its own products. This is why Barracuda has convinced itself that Sourcefire will probably have to do a deal at some point – with an enemy like Trend even occasional friends need to huddle together at almost any price.
Where all this goes is anyone’s guess, but it is ironic that a company founded to promote the joy of Open Source security to a willing public has run into trouble over a complex patent dispute that is not of its making.