Disk encryption can be expensive

Finally, someone who’s making sense about the $350M McAfee purchase of SafeBoot. When I read the alerts about the purchase, it just didn’t make sense to me.

Jon Oltsik cuts to the chase, asking how did McAfee pay that much money for a software disk encryption software product? Maybe there was a bidding war we aren't aware of or something.

Not too far down the road, disks will include encryption from the manufacture. Plus, Vista BitLocker stands to do the same for much of the Windows market.  And there are other solutions likely available at a lower asking price.

Nuf said. Read Jon’s CNET post for more. Well said, Jon.

Comments

[Frodo]

Maybe because of revenue potential? After all Checkpoint paid nearly $600m for Pointsec earler this year...

[Mitchell Ashley]

Possibly... here's my rough calculation of the numbers:

Purchase price - $350m
Assume a 6X multiple - $58.3M annual revenue
1,500 customers - $39K average revenue per customer
At a 10x multiple - $35M, $23.3K annual revenue per customer

That's making some assumptions we don't know about yet, but lets assume SafeBoot is doing somewhere between $35-60M with 1,500 customers. McAfee's bet has to be that they can exponentially grow that revenue by getting hard disk encryption bundled and sold into their customer base before disk encryption is a no cost item (e.g. no incremental revenue.) They have to be making the bet that this is a ways off, which even if it were available today (other than thru Vista Ultimate) it we be some time before every desktop or laptop's drives are encrypted. Laptops will likely be the first. Then again, Microsoft could get wise and drop BitLocker into Vista Business and/or Vista Home Premium. I'd look for them to do that sometime in the next year plus.

[Frodo]

A fair appraisal, add in a few $1.8m deals like the one with the USDA and the cost justification seems easier.

[Frodo]

Seems you were wrong on this one Mitchell as McAfee's numbers show..