Deal Radar 2009: Barracuda Networks

Barracuda Networks offers content security products that protect organizations from email, Web, and IM threats. The company sells low-cost, on-premise network security appliances such as antispam equipment and firewalls.

Among some of the products on offer are the Barracuda Spam & Virus Firewall, Web Filter, IM Firewall, SSL VPN, Load Balancer, Message Archiver, and the BarracudaWare software portfolio, all of which are Linux-based. The company designs its products to be easy to deploy within organizations, and they require no special IT expertise within the client company. Trained support technicians are available as part of Barracuda Networks’ solutions, and the company operates a 24/7 operations center to monitor and counter the newest Internet threats and protect its customers. All of this is available to users without a licensing or a per user, per server fee. 

It’s widely understood that companies are constantly at risk of being hacked or of having spam and malicious content sent to them. As I mentioned in an earlier post, in the first half of 2009, 61 of the top 100 Web sites delivered malicious content to their visitors because the sites had been hacked and malware implanted. Of these infected sites, over 75% were legitimate. Google identified nearly 325,000 sites as containing malware in August of this year, compared with 150,000 a year ago. Demand for products such as those offered by Barracuda is thus always increasing.

Barracuda Networks caters mostly to the small and midsized business segment, although several clients are large organizations with over 200,000 employees. The company boasts a client roster of over 85,000 organizations including giants such as Coca-Cola, FedEx, IBM, and Harvard University. 

Based in Campbell, California, Barracuda Networks has offices in 10 international locations and distributors in over 80 countries worldwide.  The company was founded in December 2002 when the founders felt that spam and security threats were growing rapidly and posed a great risk to networks. They realized that plug-and-play hardware was the solution for protecting against these threats and developed the Barracuda Platform. The concept took off, and by July 2004 the company had opened offices in the UK and China to support global sales.

Barracuda Networks was founded by Dean Drake, president and CEO, Michael Perone, EVP and CMO, and Zach Levow, CTO. Prior to founding Barracuda Networks, Drake was the founder of Boldfish, an enterprise messaging solutions provider later acquired by Siebel Systems. Prior to Boldfish, he was founder, president and CEO of Design Acceleration, maker of design analysis and verification tools, which was acquired by Cadence Design Systems. Perone started his career as a systems engineer and worked for several years in corporate IT at both GE Aerospace and NASA Jet Propulsion Laboratories. In 1998, he co-founded Address.com, a free email and Internet access service, and co-founded Spinway, Inc., which was sold to Kmart Corporation in November 2001. Levow was co-founder and VP of engineering for Affinity Path, a private label DSL/dial-up ISP with over 4,000 partners. Prior to that, he was also co-founder and CTO of Spinway, Inc.  

In January 2006, the company received its first and thus far only outside investment of $40 million from Sequoia Capital and Francisco Partners. Over the years, Barracuda has acquired several companies, thereby reducing the competition in its space while increasing its offerings. Most recently, this October, it acquired Purewire, Inc., a SaaS-based secure Web gateway provider. In September 2009, Baracuda bought a controlling stake in Phion, an Austria-based public company that installs firewalls for enterprises for $18.7 million. In November 2008, it acquired BitLeap, a local and offsite data backup and disaster recovery solution provider. In mid-2008, Barracuda made a few attempts to buy Sourcefire, a publicly-traded an open-source software firm for $7.50 per share, but the deal was rejected by Sourcefire and fell through. Prior to that, in September 2007, Barracuda acquired a Web firewall appliance maker NetContinuum for an undisclosed amount.  
      
Last year, the web security market was estimated at about $2 billion and was growing 20%-30% annually. McAfee is still the leader in the web security market, with competitors such as Websense, Symantec, and Blue Coat close on its heels. Smaller companies such as eSafe and Lizard Protector are also market participants. McAfee’s Q2 revenues grew 18% to $469 million, an indication of how important Web security has become. While Barracuda caters more to the SMB segment, these other companies focus largely on big enterprises.

Barracuda aims to make its products affordable with no per-user or licensing fees. For example, the Cuda Tel Communication Server starts at $1,999 while the Barracuda Backup pricing includes a one-time hardware fee for the Barracuda Backup Server and a monthly subscription to the Barracuda Backup Service plans. Barracuda Backup Server pricing starts at $999. The company is profitable.

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This segment is a part in the series : Deal Radar 2009