Avast sees AVG acquisition as bolstering SMB, channel presence

For the channel, the key issue is what the acquisition will mean to the SMB businesses of both companies, particularly the MSP-focused RMM business AVG originally acquired from Level Platforms. Avast CEO Vince Steckler addresses the issue.

Vince Steckler 300

Vince Steckler, Avast Software’s CEO

The endpoint security market has proved remarkably resistant to consolidation in recent years, despite the large number of players. On Thursday, that trend was disrupted with the announcement that Avast Software has entered into an agreement to purchase AVG Technologies for approximately $USD 1.3 billion. The deal is expected to close around late September, following regulatory and AVG shareholder approval.

Vince Steckler, Avast Software’s CEO, said that the acquisition was the culmination of a long process between two local competitors who know each other well.

“We both started in 1988 in the same town, in what is now the Czech Republic, and have known each other forever,” Steckler said. “Over the years, we talked many times about getting together. Since I joined Avast in 2009, I have had half a dozen serious discussions about combining. We both finally realized we have a better future together than we do separately. We started the process seven weeks ago. It went fast because we know each other so well, and we reached agreement last night.”

Steckler said that the acquisition is about both acquiring customers and adding technology, depending on the market segment. The combined company will service over 400 million endpoints, 160 million of which are phones or tablets.

“When we look at the consumer business, it’s very much about adding endpoints,” he stated. “In the consumer mobile business, it’s about adding endpoints. On the other hand, in the consumer middleware business, it’s about adding technology, because of AVG’s 2014 acquisition of Location Labs, which gave them a strong middleware product for operators. In the SMB, space, it’s about both the technology and the channels.”

Steckler said that the companies are a good fit because they combine Avast’s strength in the consumer market with AVG’s greater presence in the SMB space.

“We have historically been consumer endpoint focused, and we are very strong there, stronger than AVG,” he said. “On the other hand, our SMB business is fairly small. AVG’s SMB business is five times the size of ours in terms of revenue.”

Steckler also stated that while AVG isn’t limited entirely to the S side of the SMB space, the AVG acquisition will allow them to pursue larger customers.

“We have some customers who are using 20,000-30,000 nodes, which is not a small business,” he said. “However, we have tended to stay away from larger organizations in the past because we didn’t have the ability to support them, or the reseller base to support them. AVG has a reseller base which can support larger organizations.”

Reseller concern about the acquisition revolves around the fact that while both AVG and Avast have SMB business units, their business models are very different.

AVG, which had earlier had a conventional pay-based SMB solution, launched Avast for Business last year. It is being sold on the same freemium model as their consumer product. While the company never held out much hope that VARs, who like to get paid, would embrace a freemium model, they hoped to get more traction among MSPs, who could blend such services into their offerings to make the whole more attractive. Avast for Business is run by Glenn Taylor, who is also Avast’s Chief Strategy Officer.

“Avast for Business is going pretty well,” Steckler said. “We have crossed the 1 million endpoint threshold for active devices. Free products tend to be slow growth until you hit 10 million. Our momentum here isn’t well known because we don’t do much PR or marketing around the free products.”

AVG Business on the other hand, works on a conventional pay model. Much more unconventional however is their use of an RMM platform they acquired with Level Platforms to take the business products – Managed Workpace and their Cloudcare security service – to market through an MSP channel. So the issues of concern are whether these different models can be easily harmonized.

Steckler indicated that at this stage of the transaction, they are very limited in what they can say and do – but he gave a few hints.

“We haven’t dug into that kind of detail about product lines and models,” he said. “We have signed a definitive agreement to acquire AVG subject to regulatory and shareholder approval. Until we get to where it’s tendered, we can’t really dig into the business and understand it. We can only do things at high level until it closes.”

Sorting out the differences between the two models will be a priority.

“This is part of the hard work over the next two to three months, and how to harmonize the product set,” Steckler said. “I would expect that the investments AVG has made are going to continue. Whether they can co-exist with a freemium solution – that we don’t know yet. But if they can’t co-exist, it doesn’t mean that we kill them.”