ProofPoint Makes Another Acquisition

ProofPoint Makes Another Acquisition

Security-as-a-service provider ProofPointannounced today it had dipped into the well again and acquired business messaging technology company Sendmail for approximately $23 million cash. Structured as a simultaneous signing and closing, the transaction requires no additional approvals. ProofPoint acquired Armorize last month, along with its team of "ethical hackers."

Sendmail's messaging transfer agent (MTA) was the first broadly distributed MTA platform supporting simple mail transfer protocol, or SMTP, and it is still widely used for intranet and Internet messaging.

Noting that ProofPoint's enterprise protection solution is built on Sendmail's MTA, ProofPoint CEO Gary Steele said, "Acquiring Sendmail gives Proofpoint ownership of this definitive industry-standard technology, enabling us to further optimize the solution to meet the evolving demands of public and private cloud architectures and their associated security requirements."

ProofPoint plans to further enhance its Sentrion MTA platform through the acquisition while also continuing to maintain its open source distribution. However, because Sendmail's legacy business model is built around the sale of appliances and perpetual licenses it has no recurring revenue stream. As a result, ProofPoint plains to transition the business to a subscription model.

The security-as-a-service provider expects Sendmail to have an immaterial impact on fourth-quarter revenue but it will widen the company's non-GAAP net loss by approximately $2 million, or $0.06 per share, until the subscription model is in place.

However, the company expects Sendmail will contribute approximately $5 million in revenue for the full year of 2014, half of which would be from the renewal of legacy maintenance contracts and the other half coming from new sales of Proofpoint solutions to these existing customers.

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