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.

The purchases of Trusteer and Silver Tail remove two of the more prominent web-fraud detection vendors from the market, Litan said.

Remaining independent security companies include NuData Security Ltd. of Vancouver, British Columbia, and Israeli firm Versafe Ltd., which is backed by the private equity arm of Susquehanna International Group. IBM and Trusteer expect to close the deal in the third quarter.

Earlier this year, in June, IBM bought SoftLayer Technologies Inc., a Texas-based cloud infrastructure provider majority-owned by private equity firm GI Partners, for $2 billion. A month later, it acquired closely held Israeli cloud computing technology company CSL International for undisclosed terms.

IBM also acquired Cleveland-based UrbanCode Inc. and the software portfolio of Star Analytics Inc. earlier this year.

-- Written by Chris Nolter in New York

More from Mergers and Acquisitions

Aceto's Search for Deal May Be Slowed by DOJ Subpoena

Aceto's Search for Deal May Be Slowed by DOJ Subpoena

Could Spotify Be Next on Amazon's Wish List?

Could Spotify Be Next on Amazon's Wish List?

Sprint, T-Mobile Might Have to Do More Than Make Promises to Get Deal Approved

Sprint, T-Mobile Might Have to Do More Than Make Promises to Get Deal Approved

Xerox Received Interest From HPQ Before Fuji Deal: Sources

Xerox Received Interest From HPQ Before Fuji Deal: Sources

Divestitures at Newell Expected in Weeks: Wells Fargo

Divestitures at Newell Expected in Weeks: Wells Fargo