McAfee, the Intel-owned security specialist, has just announced that it is buying Stonesoft Oyj,a Finland-based specialist in firewall protection products, for $389 million in cash. The move will let McAfee expand its product line specifically in cloud-based networked security products, to complement the antivirus services for which McAfee is best known.

Stonesoft, a publicly-traded company in Finland, says in a statement to the market that it is publicly recommending the offer.

It notes that the price offered for each share tendered in the offer will be €4.50 in cash ($5.90), a premium of around 142% compared to the volume-weighted average trading price of the Stonesoft shares on NASDAQ OMX Helsinki over the last 12 months; 106% above the average trading price in the last three months; and a 128% premium on the closing price last Friday.

The deal comes at a time when PCs are sitting side by side with other kinds of devices like tablets and smartphones on networks, and more information is moving off devices and on to cloud-based systems. Stonesoft, which has around 6,500 customers, has made a name for itself in working at the cutting edge of networked-security solutions, offering coverage for areas where hackers are learning to bypass traditional security walls, something Stonesoft refers to as Advanced Evasion Techniques. It sells security-as-a-service style products that work across both customer premises’ equipment and cloud-based services. Stonesoft’s customers include governments, retailers, financial services companies and more.

“With the pending addition of Stonesoft’s products and services, McAfee is making a significant investment in next-generation firewall technology. These solutions anticipate emerging customer needs in a continually evolving threat landscape,” said Michael DeCesare, McAfee President, in a statement. “Stonesoft is a leading innovator in this important market segment.” He added that McAfee will integrate Stonesoft’s products into McAfee’s cloud-based Security Connected strategy. This will include McAfee’s IPS Network Security Platform, McAfee’s Firewall Enterprise for the high assurance market segment, and now Stonesoft’s next-generation firewall — with the “next-generation” of firewall management also a point highlighted by Pal Calhoun, VP and GM of security products for McAfee, in a blog post.

This deal comes two months after McAfee announced it it acquired ValidEdge from LynuxWorks, to beef up its malware detection services. Terms of that deal were not disclosed.

All the same, Stonesoft may represent the future of IT security, but presently its results are more mixed. For the first quarter of 2013, net sales for Stonesoft were 9.2 million euros ($12 million), up 12% over last year, but it also posted a loss per share of 0.03 euro cents ($0.04) down by 0.02 euro cents on a year ago.

There is a strong business argument for McAfee buying into more expertise and products in the area of networked security.

On one hand, security attacks on cloud-based systems are on the rise, and that is affecting both consumers and enterprises. On the consumer side, companies like Twitter and Evernote have reported security breaches.

On the enterprise side, companies like Github, Dwolla and Zendesk (with the latter affecting Tumblr, Pinterest and more) have also been impacted by malicious hackers on the hunt for sensitive data.

On the other hand, the bedrock of McAfee’s security portfolio is eroding away: according to figures from IDC out last month, PC devices saw their biggest single-quarter decline in Q1, with shipments down 14% to 76.3 million units. That, in effect, is a decline in the sector that McAfee traditionally counted as its biggest, as consumers and businesses opt instead for devices like tablets and smartphones, which rely much more on cloud-based storage and computing, to replace how PCs would have traditionally been used.

Release below.

SANTA CLARA, Calif., May 6, 2013 – McAfee today announced the execution of a definitive agreement to initiate a conditional tender offer for the acquisition of Stonesoft Oyj (NASDAQ OMX Helsinki: SFT1V), a leading innovator in next-generation network firewall products, for an aggregate equity value of approximately $389 million in cash.

Stonesoft delivers software-based, dynamic, customer-driven, cyber security solutions to secure information flow and simplify security management. Stonesoft’s product portfolio of next-generation firewalls, evasion prevention systems, and SSL VPN solutions addresses businesses of all sizes. Through the pending acquisition of Stonesoft, McAfee expects to extend its leadership position in network security.

“With the pending addition of Stonesoft’s products and services, McAfee is making a significant investment in next-generation firewall technology. These solutions anticipate emerging customer needs in a continually evolving threat landscape,” said Michael DeCesare, McAfee President. “Stonesoft is a leading innovator in this important market segment. We plan to integrate Stonesoft’s offerings with other McAfee products to realize the power of McAfee’s Security Connected strategy. Stonesoft products will benefit from the collective expertise of more than 7,200 McAfee employees. Leveraging McAfee’s cloud-based Global Threat Intelligence service will provide our combined customers with unparalleled security.”

The rationale for the proposed acquisition is as follows:

Network security is a vital component of a comprehensive security solution. Next-generation firewalls solve critical customer needs and represent one of the fastest growing market segments in network security.
Stonesoft is a leading innovator in the next-generation firewall segment. Gartner positioned the company as “visionary” in the 2013 Network Security Firewall Magic Quadrant. Stonesoft achieved “Recommend” status in NSS Labs’ latest 2013 firewall tests.
With Stonesoft, McAfee expects to grow its network security business by delivering the industry’s most complete network security solution with three leading platforms: McAfee’s IPS Network Security Platform, McAfee’s Firewall Enterprise for the high assurance market segment, and Stonesoft’s next-generation firewall.
Based in Helsinki, Finland, Stonesoft is trusted by more than 6,500 customers across the globe. Stonesoft’s customer base can now benefit from an integrated, comprehensive security solution through McAfee. Similarly, McAfee’s extensive, global customer base will benefit from access to a highly-innovative next-generation firewall. Stonesoft’s innovative next-generation firewall, when combined with McAfee’s market leading IPS and high assurance firewall, provides customers with one of the most complete network security portfolios in the industry.

“The combination of the two companies allows Stonesoft to benefit from McAfee’s global presence and sales organization of over 2,200 employees, best-in-class threat research and technology synergies” said Ilkka Hiidenheimo, Chief Executive Officer of Stonesoft. “Combined, we believe we can offer our customers a world-class product portfolio with world-class support – all backed by Intel.”

About McAfee
McAfee, a wholly owned subsidiary of Intel Corporation (NASDAQ: INTC), empowers businesses, the public sector, and home users to safely experience the benefits of the Internet. The company delivers proactive and proven security solutions and services for systems, networks, and mobile devices around the world. With its Security Connected strategy, innovative approach to hardware-enhanced security, and unique Global Threat Intelligence network, McAfee is relentlessly focused on keeping its customers safe. http://www.mcafee.com.

About Intel
Intel (NASDAQ: INTC) is a world leader in computing innovation. The company designs and builds the essential technologies that serve as the foundation for the world’s computing devices. Additional information about Intel is available at newsroom.intel.com and blogs.intel.com.

Intel and the Intel logo are trademarks of Intel Corporation in the United States and other countries.

About Stonesoft Corporation
Stonesoft Corporation delivers software based, dynamic, customer-driven cyber security solutions that secure information flow and simplify security management. Stonesoft serves private and public sector organizations that require high availability, ease-of-management, compliance, dynamic security, protection of critical digital assets, and business continuity against today’s rapidly evolving cyber threats. The company leads research into advanced cyber threats and the advanced evasion techniques (AETs) used in stealth, targeted cyber attacks. For more information visit. http://www.stonesoft.com.

Forward-Looking Statements
This document contains forward-looking statements based on current expectations or beliefs, as well as a number of assumptions about future events, and these statements are subject to factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The reader is cautioned not to put undue reliance on these forward-looking statements, which are not a guarantee of future performance and are subject to a number of uncertainties and other factors, many of which are outside the control of McAfee or Intel.

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