No Deal: Check Point and Sourcefire is Kaput!

I know. I know. I'm on vacation, but I couldn't resist. This is big.

Both Check Point (release here, FAQ here) and Sourcefire (here) have issued releases basically calling off their deal. Evidently the pressure from the Feds became intolerable, the approval process unbearable and the likelihood of closing the deal minimal. So both parties bowed out.

First, this is a shame. I'm sure someone on the financial side will do a bit of digging to figure out why the Feds would kill this deal. Hopefully it's more than that stupid Dubai ports fiasco. I'd be very disappointed if it turned out to be a well funded competitor making waves. That's dirty pool. Frankly I'm both surprised and concerned. Given the current administration's penchant to be pro-business, this is a big step in the wrong direction.

Customers won't really be impacted too much by this deal falling apart. There was little overlap between CHKP and Sourcefire, so it will be business as usual for both companies and their customers.

Check Point is a HUGE loser. Firstly, a lot of folks like me had been calling on them to talk more lucidly about what was next. Clearly that was Sourcefire. Now it's not, so they need Plan B and that hasn't been clear or forthcoming. Additionally, you need to be big to prosper and survive in the security business. This is a very CLEAR message to Check Point that they will not be allowed to buy US security companies. That is a big problem if they want to broaden their position and remain strategic. A very big problem.

Sourcefire is a big winner here. Sure, they did waste a bit of time, but did not lose much momentum from what I see. Everything I've been hearing about their business is very positive. With profitability, a strong growth rate and the best story among all the perimeter defense plays, they are well positioned. Their price tag just went way up.

There were rumblings that Check Point got a bargain based on Sourcefire's strong Q4 and pipeline momentum. Guess that's not an issue any more. To be clear, Sourcefire is a long way off having the breadth to be a long term, publicly traded, sustainable security player - so being acquired is still the most likely outcome for them. But Sourcefire will need to find another partner quickly before they get too big. It's very hard for all but 2 or 3 vendors to do a deal north of $300 million and that's clearly where Sourcefire's price tag is now.

So overall, I think this is terrible news for the industry and America takes a black eye. Truly horrible news for Check Point. Sourcefire comes out smelling like a rose.

Now back to my previously scheduled vacation.