Proofpoint to acquire Observe IT for $225M

Proofpoint to acquire Observe IT for $225M

Post-acquisition, the vendor will move ObserveIT to a subscription-based model

Credit: Dreamstime

Cyber security and compliance vendor Proofpoint has entered into an agreement to acquire insider threat management platform developer Observe IT for US$225 million.

The acquisition is expected to close during the fourth quarter of 2019.

Under the proposed acquisition, Proofpoint plans to extend its data loss prevention (DLP) capabilities with solutions for endpoint joining mail, cloud access security broker and data-at-rest to form an enhanced enterprise DLP offering.

Observe IT’s technology and data risk analytics will be combined with Proofpoint’s information classification, threat detection and intelligence to allow for insights into user activity. Meanwhile, Proofpoint will invest in Observe IT’s insider threat management solution.

Observe IT’s technology will be integrated into Proofpoint’s information protection suite, will offer real-time detection during interactions with people, data, devices and applications, allow for security teams to respond to mishandled data and will be available in 2020.

According to Ryan Kalember, executive vice president of Proofpoint, the acquisition will add approximately 150 ObserveIT contributers to Proofpoint, and will be distributed mainly in Boston in the US and the vendor's research and development centre in Israel.

"ObserveIT will operate independently through close of the transaction and will then become a focused and distinct product group within Proofpoint with tight coordination and joint initiatives across our sales, marketing, product, and engineering groups.”

A statement by Proofpoint also claimed that Observe IT’s revenue model will transition from a perpetual licensing paradigm to a subscription-based model after the acquisition.

Gary Steele, chairman of the board and chief executive officer at Proofpoint said the acquisition shows Proofpoint’s commitment to “providing organisations with people-centric cybersecurity and compliance solutions that protect what matters: their people and the data they have access to, in a post-perimeter, cloud-first world”.

“Defending data requires the ability to detect risky insider threat behaviour and risky user activity, and swiftly mitigate risk across cloud apps, email, and endpoints.” Steele said. 

“We are the only security company that provides organisations with deep visibility into their most attacked people—and with Observe IT, we will bring to market the first truly innovative enterprise DLP offering in years. We are thrilled to welcome Observe IT’s employees and customers to Proofpoint.” 

Mike McKee, CEO of Observe IT, said Proofpoint’s business compliments his own, combining Proofpoint’s leadership, broad intelligence and R&D resources and Observe IT’s quick speed of detecting insider threats to prevent critical information loss.

“We are very excited to join the Proofpoint team and provide customers with even more powerful solutions to mitigate insider threats, decrease incident investigation time, and make sure users don’t intentionally or accidentally send valuable, confidential information externally,” McKee said.

Post-acquisition, Proofpoint expects Observe IT’s financial results to increase slightly for its revenue and billings guidance for the fourth quarter of 2019 according to a statement from Proofpoint, which would result in a dilutive impact on its shares due to guidance for non-generally accepted accounting principles (GAAP) net income and free cash flow, also for the fourth quarter of 2019.

The statement continued, outlining how fiscal year 2020 is also expected to not be profitable for Observe IT, as the shift from perpetual licence to subscription model is also expect to drag down inorganic revenue and billing contributions.

This news follows Proofpoint expanding its distribution deal with Ingram Micro to Australia and New Zealand in late October, which allowed for partners to take advantage of Proofpoint's enhanced partner program. 

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