Symantec's purchase of MessageLabs seems puzzling

Symantec [1] purchased MessageLabs [2] recently for a whopping $695 millon. MessageLabs is an email security firm handling anti-spam filter, virus protection, email archiving, anti-spyware, URL filter, email encryption and related services. The company delivers these as software as a service. As Alan Peltz-Sharpe points out on CMS Watch, Symantec did need to improve its SaaS side of the business. But Peltz-Sharpe rightly wonders: What were they thinking, paying that kind of money?

The purchase price seems particularly curious because, according to an InformationWeek article, the company only generated $145 million in revenue in fisical 2008, and while the article goes on to say that represented a 20 percent increase over the previous year, it still seems like there's a huge gap between revenue and the price Symantec paid. It's worth noting that the InformationWeek article does quote an FBR research analyst who believes it is a fair valuation based on revenue projections.

What's even more curious is that Peltz-Sharpe says MessageLabs' existing business is mostly confined to England and uses another company's technology as the basis for its solution. He is as puzzled as anyone, but speculates that perhaps it's a move to shore up its dominant market share. But even this seems strange when you consider it already dominates the email archiving market. Maybe as Peltz-Sharpe says, Symantec knows something we can't see because, on the face of it, this certainly seems like a puzzling purchase.

For more information, read:
- the InformationWeek article [3]
- The CMS Watch commentary by Alan Peltz-Sharpe [4]

Related Article:
You need to understand email archiving [5]