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TheStreet Open House

The Deal: IBM Goes Deep on Cybersecurity in Trusteer Deal

NEW YORK ( TheStreet) - To counter the increasing creativity and resourcefulness of cybercriminals, IBM (IBM) said Thursday, Aug. 15, it is buying online security company Trusteer Inc.

Alongside the purchase, IBM said it will create a cybersecurity software lab in Israel, where Trusteer is based.

The companies did not disclose the price. IBM is reportedly paying between $800 million and $1 billion for Trusteer, which has backing from U.S. Venture Partners and Shlomo Kramer.

Jacques Benkoski of U.S. Venture Partners said the transaction reflects the transition from older security paradigms such as firewalls and antiviruses to a new generation of applications.

"The benefit is to enable financial companies and enterprises to have transactions with customers even if the customers themselves are compromised," Benkoski said.

"People are going to be compromised," he added. "The idea that the enemy is inside, the enemy is everywhere, but we are going to still do business."

U.S. Venture Partners invested $6 million in Trusteer in a 2008 venture round, according to The Deal Pipeline. Gartner Inc. analyst Avivah Litan said that Trusteer and its backers may have sold at the peak of the market, noting that it is becoming increasingly difficult to defeat financial malware using existing techniques.

Trusteer has had success defending financial institutions from "botnets and fraudsters," Litan said, and developed a server-based security application. However, the server applications are increasingly coming under attack, she said, while the browser-based product continues to be the more effective offering.

"It's a cat and mouse game," she said. "I'm sure the cat can catch up with the mouse, but there have constantly been attacks on Trusteer because it is on so many desktops and used by so many banks."

An $800 million price for Trusteer would jibe with the $350 million that EMC Corp.'s RSA reportedly paid for Silver Tail Systems last year, Litan said. Silver Tail's revenue is less than half that of Trusteer's.

The analyst suggested that Armonk N.Y.-based IBM, led by CEO Virginia M. Rometty, may want to take on Symantec Corp. and McAfee Inc. in providing security of endpoints, such as laptops, computers and servers that connect to networks.

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