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The Post-Sony World: Why A Defense Contractor Bought A Cybersecurity Firm For $1.9 Billion

Raytheon’s Websense deal will create a cybersecurity giant for government and corporate America.

The Post-Sony World: Why A Defense Contractor Bought A Cybersecurity Firm For $1.9 Billion
[Source Photos: Flickr users Faungg and Kevin Dooley]

One of the worst-kept secrets in the cybersecurity world is out: Raytheon, one of the world’s biggest defense contractors, just spent a staggering $1.9 billion on a cybersecurity company called Websense.

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It’s one of the biggest tech deals so far this year. So why is a military firm best known for building missiles plopping down money for software and tech talent? The answer doesn’t have to do with cyberwar, but with the sweet, sweet cash of corporate America.

Let’s explore what this means. Because of a number of high-profile hack attacks over the past two years–Target, Sony Pictures, and JPMorgan Chase, just to name a few out of an even larger number of publicized and covered-up breaches–corporate America is running scared. Fear of liability, fear of customer loss, and fear of stumbling stock prices and brand reputation mean that enterprise customers feel compelled to shell out big, big bucks for cybersecurity products. Corporate boards are, perhaps understandably, nervous.

That global market, which analyst firm Gartner pegs at being worth approximately $76.9 billion in spending for 2015, is something Raytheon and its competitors want a big part of. The defense contractor has had enterprise-oriented cybersecurity products on the market for quite some time, but has only made limited market inroads. About 50% of Websense’s customers are overseas, which also gives Raytheon considerable pull outside their core market in America.

Post-acquisition, Raytheon is bundling their cybersecurity division, Raytheon Cyber Products, into Websense to create a new company. Representatives for both firms said that the new company name will be announced later this year, but it is already branded as 4-D Cybersecurity on Raytheon’s site.

The new company will be headed up by Websense CEO John McCormack and will center around Websense’s Triton platform, which is designed to prevent data theft from large corporate customers like credit card companies, banks, and retailers. Raytheon’s promotional materials for the new company emphasize “defense-grade cybersecurity” for the private sector.

“About 10% of our customers are government-related, but 90% are commercial enterprises: They span all verticals from retails to manufacturing to health care to hospitality; there probably isn’t a vertical we don’t operate in,” McCormack says. “It complements Raytheon Cyber Products, because they are the exact opposite. They’re 90% government customers, and 10% commercial.”

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Announcement of the acquisition, which has been rumored for some time, was made at San Francisco’s RSA Conference, a zoo-like mega-get-together for the corporate and government cybersecurity complex where clients and vendors meet to make deals and talk shop. It fulfills a role similar in its space to those of CES for the consumer tech world or SXSW Interactive for the web world. In a sign of how much Sony and Target shook up the industry, this year’s conference was by far the biggest ever with more than 15,000 estimated guests and speakers including actor Alec Baldwin, and historian Doris Kearns Goodwin.

David Wajsgras, president of Raytheon’s Intelligence, Information, and Services division, told Fast Company that much of the growth in cybersecurity in the past two years is due to the widespread use of mobile devices, connected machines on the “Internet of Things,” and cloud computing services that “give nation-states and other sophisticated adversaries a much broader ecosystem when they are attacking a target than ever before.”

Raytheon purchased Websense from their previous owners, private equity firm Vista Equity Partners. Vista will retain a 19.7% equity stake in the new company, along with seats on their board. The launch of 4-D Cybersecurity is tentatively scheduled for later this year.