CyberGuard Drops Bid For Secure Computing

The unsolicited offer, which Secure Computing rejected shortly after it was made, had been on the table for more than three weeks. Pat Clawson, chairman and CEO of Fort Lauderdale, Fla.-based CyberGuard, said the anxiety created by leaving the bid loaded in the chamber proved to be too much for the company's shareholders.

"We wanted to give our investors a sense of confidence that we were not going to run out and do a deal at any moment, with the market as undecided as it is right now," Clawson said, adding that he wouldn't rule out another bid for Secure Computing down the road. "It's important that investors understand that what we are doing is waiting for the right time."

Some CyberGuard resellers had voiced concern about the bid for Secure Computing because CyberGuard lagged in consolidating other recent acquisitions. At a CyberGuard partner conference in Fort Lauderdale last month, when the offer for Secure Computing was in its early stages, solution providers said the vendor first needed to get its April acquisition of content security vendor Webwasher and last year's acquisition of Linux security vendor Snap Gear in order before buying another company.

"There was an enormous amount of confusion expressed from the partners at that event," said one CyberGuard partner who attended the event. "Partners were concerned about the perceived overlap in the product line and the different brand names still lingering. And most everyone said [CyberGuard] needed to get all that in line before they go out and grab another company. No one was shy about it. They were saying, 'Just complete the consolidations, let the people go who have to go, and get on with it.' "

Clawson said he recognized the urgency to streamline CyberGuard's product set into a single brand, and he pointed to the company's recent recruitment of Bryan Bain as vice president of worldwide marketing for that purpose. "We hired Bryan to bring everything under the CyberGuard brand, and that will start happening in the next 90 days," Clawson said.

No large-scale layoffs are expected as CyberGuard consolidates its resources with those of Snap Gear and Webwasher, Clawson added. "We generally do [cost and staff] reductions at the time of acquisition. We don't see any wholesale cost-cutting in the process going forward," he said.

On the channel front, CyberGuard last month began requiring its direct-sales force to work with solution providers to get paid. The move is part of the vendor's new One Partner Program, designed to help the company achieve 100 percent of its sales via the channel, Bain said.

Kris Zupan, CEO of E-DMZ, a solution provider and CyberGuard partner in Wilmington, Del., said he already has begun seeing his deal flow increase in the wake of the One Partner Program launch. However, CyberGuard still needs to get a better handle on its acquisitions, he said.

"It's not so much product confusion for me. It's just about catching up," Zupan said. "Right now, with Snap Gear, we are up to speed and are using it in our own product. But as far as Webwasher, we are still going through the service definition on it and may offer it in about a month."

Clawson previously said CyberGuard moved to acquire Secure Computing so it could take on the big game of the firewall/VPN market: Cisco Systems and Check Point Software Technologies. "We have duplicate development expenses, duplicate marketing expenses, duplicate missions," he said. "Together, we'll be much more well-positioned to fight Check Point and Cisco."

Secure Computing promptly turned down the initial offer of a one-for-one stock swap, calling it bad for its stockholders. But CyberGuard left the bid on the table and upped the ante by saying it would raise some or all of the $297 million in cash. A Secure Computing representative, though, said CyberGuard never officially contacted the company after the first bid was rejected.