Nokia Security Appliance Sale Signals Marketplace Sea Change

As the stock markets were crashing earlier this week, a mysterious blip popped on the IT security radar: Nokia was looking to unload its security appliance unit to an undisclosed investment firm. A few media outlets picked up on this obscure report in The Wall Street Journal and little more news has come from it in the days that have passed.

The news came as Nokia announced the acquisition of e-mail application vendor OZ Communications and its intentions to focus on its core business, cell phones. Given its business intentions toward cell phones and mobile communications, it makes perfect sense that it would jettison the relatively small network security appliance division to free cash and resources to defend its spot atop the cell-phone hill.

If Nokia sale proves true, it has significant ramifications throughout the security industry and reflects the accelerating competition in the security appliance marketplace.

Cisco is the undisputed leader in security appliances. It’s spent the better part of the last decade building security applications from the foundation of its now-retired PIX firewall. The acquisition of IronPort gave it a powerful weapon in the e-mail security market. It’s probed deep into the intrusion prevention arena by incorporating behavior anomaly detection from Okena and security information management from Protego Networks. And the marriage of its network access control and perimeter security technologies with Trend Micro anti-virus and malware software makes for a powerful combination in its unified-threat management appliances.

While the marketplace has long favored security hardware over software installations, Check Point Security Technologies has hung in as the No. 3 perimeter security vendor (falling behind Juniper Networks, which vaulted forward with its acquisitions of firewall juggernaut NetScreen Technologies and SSL VPN pioneer Neoteris). Few dispute the superior technology of Check Point’s vaunted FireWall-1 and complementary security applications, but it’s always lacked an enterprise-class, homegrown appliance (although it now has midmarket-level UTM appliances and consumer-grade set-top firewalls).

Part of the reason Check Point has maintained its marketplace position is its long relationships with hardware partners. The biggest and strongest of those marriages is with, you guessed it, Nokia. While Check Point partners with other white box appliance makers, such as Crossbeam Systems, few other hardware vendors have the same depth of partnership with Check Point than Nokia. No sooner did news break of Nokia’s pending sale, described as “advanced talks,” did investors issue warnings that the deal could disrupt Check Point’s short-term earnings.

How much of a disruption could Nokia’s exit from the security market have on Check Point and its resellers? Depends, since Check Point has been attempting to push into the emerging data loss prevention (DLP) products set to give its resellers something new to sell and re-energize a channel that’s grown dependent upon software license renewal revenue rather than new installations.
All of this is happening against a backdrop of intense activity in the security appliance market. Fortinet continues to make significant gains in all levels of the marketplace with its UTM appliances and integrated security switches. Watchguard Technologies, under new ownership and with a new strategic direction, is showing signs of life with its revamped line of firewalls and UTM devices. And, most significant, McAfee acquired a boat load of security hardware, including the former CipherTrust e-mail security boxes and the fantastic Secure Firewall (formerly known as the Sidewinder G2) through its acquisition of Secure Computing. All this activity points to renewed demand for simplification of network security architecture—the mainstay argument for deploying integrated security appliances.

But the security appliance market isn’t a place for the timid. Symantec was one of the first vendors to charge into the UTM appliance market with its Security Gateway and VelociRaptor firewalls. Those appliances were launched with great promises of replacing anti-virus software installations, but fell far short. Even after more than five years in the field, Symantec withdrew from the UTM market in 2006 after never generating more than $30 million annually.

Likewise, Network Engines bet on building Microsoft ISA servers on its white box hardware platform was ushered in with great promise and fanfare. Despite the benefits of pre-integrating the security software with a purpose-built appliance, which seemed like a logical marriage, the marketplace didn’t respond positively. Granted, a Microsoft security appliance was probably premature, but the concept was sound.

Security remains one of the hottest and, likely, recession-proof technologies in the channel. End users—particularly SMB companies—are always seeking greater simplicity and lower total cost of ownership. All of this security appliance activity will result in greater competition among security hardware vendors. That vendor-to-vendor competition will translate into more competition for solution providers to join security vendor channel programs. And that will lead to better pricing and support that will help accelerate business. 

Lawrence M. Walsh is the vice president and group publisher of Channel Insider. You can reach him at [email protected].

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