Sophos buys antispam vendor ActiveState for $23 million

U.K. antivirus company Sophos PLC said Wednesday that it bought the Canadian company ActiveState Corp. for $23 million in cash, adding ActiveState's line of antispam products to Sophos' enterprise antivirus software.

The deal, which closed on Tuesday, will strengthen the position of both companies, which faced stiff competition for business customers from major antivirus vendors selling integrated antispam and antivirus products, industry experts say.

Based in Vancouver, British Columbia, ActiveState is a six-year-old, privately held company that made a name for itself selling software development tools for open source languages before moving into the content filtering arena, according to Steve Munford, president and chief executive officer of ActiveState.

The deal comes after the two companies formed a working relationship six months ago to cooperate in selling their technologies into large corporate accounts, according to Steve Orenberg, president of Sophos' U.S. operations.

ActiveState products complement Sophos' software and the companies had similar customer bases, focusing almost exclusively on enterprises and business customers, rather than consumers, he said.

ActiveState's PureMessage antispam gateway analyzes e-mail messages to detect spam and also has content inspection features that allow companies to set and enforce corporate policies for message content.

Sophos initially will support PureMessage along with its own gateway mail product, MailMonitor. The two products will be merged some time in 2004, Orenberg said.

Sophos also will continue to support ActiveState's development tools business indefinitely under the ActiveState brand, Orenberg said.

Though not core to Sophos' business model, ActiveState's programming tools and languages business provides a deep well of development experience within the company that can contribute to filtering and antivirus tools, he said.

The ActiveState products also have a loyal customer base within Fortune 1000 companies that Sophos hopes will serve as a calling card for the company's antivirus and antispam products, Orenberg said.

Development of the PureMessage product will continue in Vancouver and ActiveState's 104-person staff will be absorbed into Sophos, according to a company spokeswoman.

ActiveState's sales organization will become a North American West Coast sales force for the Abingdon, U.K., company, Munford said.

Munford will take a position as Sophos' Global Vice President of Messaging and head up the company's integration efforts, he said.

For Sophos, the decision to expand into antispam was inevitable, according to Brian Burke of IDC.

"Sophos had to get involved in antispam. Their competition would have killed them if they didn't," he said.

Despite a strong reputation among enterprise customers, especially in Europe, pressure on the U.K. company was mounting from Symantec Corp., Network Associates Inc. and other companies, which have all announced new products or partnering agreements to add antispam to their products in recent months, according to Jan Sundgren, an industry analyst at Forrester Research Inc.

In addition to strengthening Sophos product offerings against those competitors, the ActiveState purchase adds more generic content filtering technology to Sophos' product line, which will serve the company well with customers looking for help in areas such as e-mail content security and compliance with regulations once the spam wave has passed, Burke said.