Monday, July 3, 2006

Cisco, Guardium deal signals network security's strength

By Christopher Calnan

Cisco Systems Inc.'s investment in Waltham's Guardium Inc. last month has caught the attention of industry analysts, who noted that it is the first investment by Cisco in application data security.

The investment is expected to lend cachet to the 4-year-old Guardium, enabling it to attract more customers while giving Cisco a closer look at Guardium's technology.

The 60-employee Guardium, which produces software that protects databases, was founded in 2002.

"Cisco choosing Guardium as a strategic investment really validates Guardium's technology and lead position in the marketplace," said Lester Fagen, an attorney for Goulston & Storrs PC, a Boston law firm that represents Guardium.

Guardium Chief Executive Ram Metser was previously the co-founder and CEO of Waltham-based Telekol Corp., which was purchased by Nokia in 1999 for more than $56 million.

Cisco's investment in Guardium was part of a $6.3 million third funding round that included four venture capital firms that raised its total VC amount to $21 million. It's unclear exactly how much California-based Cisco committed, but Boston-based Aberdeen Group released a report this month that said Cisco's move into security software was more significant than the investment amount.

The report contends that Cisco may be following EMC Corp.'s lead of expanding its business from hardware to software, from appliances to applications.

"EMC is a good comparison to make," said Mounil Patel, a research director of the Aberdeen Group Inc. "I think, in a sense, Cisco is doing the same thing."

Noel Yuhanna, senior analyst for Cambridge-based Forrester Research, said Cisco is testing the waters of network security and the Guardium investment will provide a window on the data it's protecting.

"There's a huge market that they want to tap into: network security," he said. "This is a market they'll grow in coming years because it's a growing market."

Not everyone considered the investment a watershed moment for Cisco.

Rodd Langenhagen, head of Boston investment bank Revolution Partners' security software practice, said Cisco has previously invested in several software companies and the Guardium deal is "completely a non-event."