SafeNet Announces Plans to Acquire nCipher for Cash [1]

Consolidation continues as SafeNet offers $150 million ($83M net of nCipher cash) for nCipher. This is a market share grab for SafeNet, which has a heritage in encryption. It's hard to remember companies like Cylink and Rainbow Technologies, but these were encryption vendors acquired by what has become SafeNet. By acquiring nCipher, they both add to their arsenal with some key management and data encryption capabilities and take another potential competitor out of play. This also gives SafeNet an entry into the Identity Management space (through nCipher's acquisition of Abridean), but they'll need to do a lot more to become a player in IDM.

I don't really have an opinion on the $150 million price, since financial analysis isn't really my bag, but from a marketplace perspective, this is further evidence that smaller companies cannot make it on their own and if you aren't big (> $100 million revenue), you are not a predator - you're prey. Over time, the winners will be a handful of multi-billion dollar companies, most likely NOT security pure-plays.

As with every deal, nCipher customers should be asking some tough questions to their reps, like what happens to the product lines and deciding whether it makes sense to consider alternatives (though there aren't really that many left).