ForeScout Buys OT Security Provider SecurityMatters For $113M

ForeScout has purchased SecurityMatters to gain granular visibility into what devices are connected to what networks on the operational technology side of an organization.

The San Jose, Calif.-based IoT security vendor said its $113 million acquisition of the Eindhoven, Netherlands-based startup will build on the partnership that's existed between the two companies for almost a year, according to ForeScout CEO Mike DeCesare. Adding SecurityMatters capabilities should make ForeScout a real and stable player in the fast-growing OT security market, DeCesare said.

"Visibility is just so foundational to what ForeScout does that we felt the need to acquire and deeply integrate these products together to give an organization a single pane of glass or platform that will give them visibility across the extended enterprise," DeCesare told Wall Street analysts during the company's earnings call Thursday.

[Related: CRN Exclusive: ForeScout Promotes Jonathan Corini To Global Channel Chief]

A majority of ForeScout's customers began by using the company's CounterACT network access control (NAC) software in the IT part of their network, DeCesare said. But because CounterACT is both passive and agentless, DeCesare said it makes quite a good fit for the OT part of an organization's network as well, with customers already making significant deployment of CounterACT into those spaces.

DeCesare said SecurityMatters will help with this evolution by providing visibility into non IT-based devices on OT environments such as specialized controllers, actuators, and sensors. This has taken on increased importance following the 2017 WannaCry and NotPetya ransomware attacks, which DeCesare said demonstrated how OT network vulnerabilities can lead to major financial and business disruption.

"There's a mad scramble around the planet right now for companies to figure out what their cybersecurity strategy is for the OT space," DeCesare said.

Other major security vendors are evaluating acquisitions on the OT security space, but DeCesare said they remain worried about making too large of an investment into a company that's relatively small and unknown today.

Although SecurityMatters has just 80 employees and annual revenue of less than $10 million, DeCesare said they were ForeScout's top-ranked vendor in the space based on an evaluation of the existing partnership. SecurityMatters was founded in 2009, and has raised $5 million in two rounds of outside funding, according to CrunchBase.

Integrations between ForeScout and SecurityMatters have already been largely built over the course of their year-long partnership, DeCesare said, so the company expects to be very quick in presenting a joint offering out to the company's joint customers. SecureMatters has a complete set of connections into the OT infrastructure network, DeCesare said, supporting major vendors in the space such as Belden.

"We are quite comfortable with their technology," DeCesare said.

ForeScout's stock soared 8.47 percent to $30.49 in after-hours trading Thursday. The company also reported third quarter revenue of $85.6 million, up 23.5 percent from $69.3 million the year prior. That edged out Seeking Alpha projections of $80.1 million per share.

As for profitability, ForeScout recorded a GAAP net loss of $8.3 million, or $0.20 per share, as compared with a GAAP net loss of $1.3 million, or $0.21 per share, a year earlier. From a non-GAAP perspective, ForeScout recorded net income of $5.1 million, or $0.10 per share, up from $2.6 million, or $0.08 per share, last year. That beat Seeking Alpha's projection of a net loss of $0.11 per share.