[ISN] Sourcefire Stock Up 3.3% in Debut

From: InfoSec News (alerts@private)
Date: Sun Mar 11 2007 - 23:10:22 PST


By Alec Klein
Washington Post Staff Writer
March 10, 2007

Security software maker Sourcefire debuted yesterday as a public 
company, and its share price nudged up 3.3 percent on the first day of 
trading. The market value of the Columbia company reached of $358 
million, far exceeding its price when national security concerns 
scuttled an Israeli firm's attempt to buy Sourcefire in 2005.

The company sold shares in its initial public offering at $15 each, 
above analysts' $12-to-$14 forecast, and raised an estimated $71.8 
million. Sourcefire closed at $15.49 a share on the Nasdaq Stock Market.

Sourcefire, which makes software that detects, monitors and blocks 
unauthorized access to computer networks, plans to use the money for 
working capital and general corporate purposes, according to public 
filings. Its software is used by more than half of the 30 largest U.S. 
government agencies -- including the FBI, the Department of Defense and 
the Department of Homeland Security -- and by government contractors 
such as Lockheed Martin, according to company records.

Sourcefire's ties to the intelligence community raised concerns when it 
agreed in October 2005 to be acquired for $225 million by Check Point 
Software Technologies, an Israeli company. The federal Committee on 
Foreign Investment in the United States expressed concerns about 
national security. Sourcefire's commercial product -- based on software 
called Snort because it "sniffs" data to detect network breaches -- is 
founded on an open-source program, meaning that people can download it 
for free and see how it was written. In March 2006, the companies 
canceled the deal.

With its IPO, Sourcefire is capitalizing on growing demand for computer 
security software, but it must compete against bigger companies, 
including McAfee. Sourcefire attracted $56.6 million in venture-capital 
funding even as other high-tech start-ups sought to be acquired rather 
than go public because of the relatively high cost of complying with 
accounting regulations.

The company declined to comment yesterday, other than in a prepared 
statement in which chief executive Wayne Jackson said that "everyone at 
Sourcefire is excited about passing this important milestone and 
entering the next phase of the business as a publicly traded company."

Sourcefire was founded in 2001 by a software engineer. Its revenue rose 
36 percent, to $28.9 million, for the nine months ended Sept. 30, 2006, 
from $21.2 million in the comparable period in 2005. Sourcefire has yet 
to post an annual profit, but its upward trajectory is appealing to 
investors, an analyst said. "It seems we're on the cusp of breaking into 
uncharted financial territory, which is a big draw for investors," said 
David Menlow, president of IPO Financial Network, a research firm in 
Millburn, N.J.

Staff writer Kim Hart and staff researcher Richard Drezen contributed to 
this report.

Copyright 2007 The Washington Post Company

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