http://www.baltimoresun.com/business/bal-bz.sourcef
ire13apr13,0,7066560.story?coll=bal-business-headlines
By Stacey Hirsh
Sun reporter
April 13, 2006
Martin Roesch's technology company was started in 2001 the
same way
many others begin - from his living room.
During its first year, Roesch's network security firm
Sourcefire Inc.
was running shipping and receiving from the foyer and
conducting data
operations from what is now the in-law suite at his
Eldersburg home.
"It was definitely a startup," recalled Roesch,
36, who is now the
company's chief technology officer.
Five years later, Sourcefire has grown to 150 employees with
offices
around the world, including two at its Columbia
headquarters. The
network security software Roesch developed is an industry
leader. And
despite last month's high-profile disappointment when the
government
blocked the $225 million sale of Sourcefire to Israeli-based
Check
Point Software Technologies Ltd. because of security
concerns,
executives say the company is poised to move forward.
Sourcefire is considering an initial public offering,
executives said.
And with the Check Point deal off, executives said the
company's main
focus is growing the business, gaining market share and
improving
profits.
Michele Perry, Sourcefire's chief marketing officer, said
the company
is "gunning for a fourth-quarter IPO."
"Last year, that was one of the options we had on the
table that we
were moving toward, and Check Point came out of the woodwork
and tried
to acquire us," Perry said. "So we're just back
on our plan."
Wayne Jackson, Sourcefire's chief executive officer, was
more measured
in his remarks.
"We want to be in a position to be a public company in
that time
frame," Jackson said in an interview at his office
this week.
Jackson, 44, said that Sourcefire's focus is to
aggressively grow its
business, so that the decision of when - or whether - to
take the
company public is within their control.
Sourcefire announced in October that it would be acquired by
Check
Point. But the acquisition raised national security issues
and was
under investigation by the Committee on Foreign Investment
in the
United States, the same agency that investigated Dubai Ports
World's
bid to run some operations at six U.S. ports including
Baltimore's.
Check Point announced late last month that it was pulling
out of the
deal.
With the Check Point deal behind them, Jackson said,
Sourcefire is no
longer focused on being acquired. He said the company has
consulted
with a bank about financing strategies to help it expand.
Sourcefire
has been profitable since the fourth quarter of 2005,
Jackson said,
while declining to provide specifics.
Sourcefire has the potential to be a billion-dollar company
as it
grabs a chunk of markets beyond intrusion prevention,
Jackson said. He
sees an IPO as one financing option but says it's more of a
starting
point than a finish line.
"Like any manager, I'd like to have as many options
as I possibly can,
so keeping the company strong enough to do [an IPO] is
something I'd
like to do, but it's not a management goal," Jackson
said. "We're
growing the company because we see a huge opportunity to be
an
industry leader."
Jeffrey W. Englander, an independent analyst who follows the
information security industry, says going public is an
attractive
option for Sourcefire and returns them to the path they were
on before
the Check Point deal. Englander has no financial
relationship with
Sourcefire.
Sourcefire makes open-source intrusion prevention technology
called
Snort, which analyzes network traffic to protect against
hackers. The
company also makes software to manage that data.
Additionally,
Sourcefire makes real-time network awareness technology,
which maps
out exactly what the network looks like.
The intrusion detection and prevention market is expected to
reach
$700 million this year, Englander said. And Sourcefire's
real-time
network awareness adds a feature to the technology that many
companies
are looking for, he said.
"That's their secret sauce," Englander said.
"It will not only prevent
threats but look at different threats within your network,
look at the
configuration of your network, see where there are potential
vulnerabilities and work to remediate those vulnerabilities
in your
network."
Snort, which Roesch invented, is a free product, and the
code is
available for anyone to see. But Englander said Sourcefire
does not
have any true direct competitors for its real-time network
awareness
technology.
Englander estimates that Sourcefire will have sales of about
$53
million this year.
Kathy Smith, a principal with Renaissance Capital, a
Greenwich, Conn.,
IPO research and investing firm, said it's a good time to
be going
public. The average stock price of companies that have gone
public
this year is up 21 percent from their IPO price, with about
half of
that return coming from the first day's trading.
There have been 46 IPOs this year, compared with 38 for the
corresponding period last year, according to Renaissance
Capital.
Smith said technology companies typically make up about a
third of the
IPOs each year.
But investors, who were burned when the tech bubble burst,
are being
more discriminating these days. In 2000, only 26 percent of
the firms
that went public were profitable. By last year, that number
was up to
69 percent, according to data from Renaissance Capital.
"It's still a good time for a technology company to
go public - the
market is very healthy," Smith said.
"However, it cannot be a company that doesn't have
substance, because
investors are selective," he said.
Jackson acknowledges that he was disappointed when the Check
Point
deal fell through, because he hates losing at anything.
(His hobby is competitive race car driving, which he says
requires
putting aside fears of going fast and focusing on a complex
set of
variables in a challenging environment, like running a
technology
startup.)
Jackson said he felt better a day after the deal fell
through when he
thought about Sourcefire's value. He said the company's
$225 million
price tag during the Check Point deal was based on the
business as of
a year ago, when the company was not yet profitable.
Jackson expects 2006 to be Sourcefire's first profitable
year.
Englander, the information security analyst, agrees that an
IPO would
not be the be-all, end-all for Sourcefire. It's a financing
option
that could give it more cash to grow the business, either
organically
or through acquisition.
"It gives them the additional resources they need to
expand the
business, and it would give them a public currency to make
acquisitions, should they desire," Englander said.
Until then, Roesch and Jackson are working at their Columbia
technology company where - as with the startups of the tech
boom - the
break room offers Xbox, a foosball table, and free soda and
candy. But
the sprawling offices are a far cry from the Eldersburg
living room
where the company began.
Copyright © 2006, The Baltimore Sun
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