Carbonite sees transformative opportunity in security market with Webroot acquisition

Carbonite retreads a path that others have taken with their announced purchase of Webroot, bringing together natural adjacencies in backup and security. While they are confident about what they see as key synergies between the two companies, some key questions still remain about how the deal will unfold after it closes.

Norman Guadagno, Senior VP of Marketing at Carbonite

Backup provider Carbonite has already made one successful pivot in its history. Founded as a consumer-oriented service and propelled by ubiquitous radio advertising, they successfully transformed into a predominantly B2B company, carving out a niche in the SMB space, which they have gradually expanded with a series of acquisitions of competitors. Late last week they made another acquisition, buying Webroot for approximately $618.5 million in cash. It is not only their largest acquisition to date, but expands their presence into the security space, rather than build up their base in backup. The deal is expected to close sometime in Q1.

“We see this as a truly significant and transformative opportunity,” said Norman Guadagno, Senior VP of Marketing at Carbonite. “We are really excited about the full picture that this creates for us.”

That strategy was followed most recently by Barracuda Networks – in reverse. Barracuda, a mid-sized security player acquired backup provider Intronis in 2015, acquiring not only a complementary business, but a much-expanded MSP reach. It seems a better parallel than Symantec’s late 2004 acquisition of Veritas – a comparison Carbonite would like to avoid at all costs, because of its disastrous results, even though most analysts and media thought that combination to be an inspired one when it was announced. The scale of that earlier combination was much greater however, with much more diverse portfolio sets and a software development process that was much different from today.

Guadagno sees the fact that both Carbonite and Webroot are mid-sized companies, fairly close in size, and very close in their market sweet spot as major assets likely to help going forward.

“We are both focused on the SMB, and offering customers something cleaner and simpler than they have had,” he said. “We are also companies of a similar size.” Carbonite has a little under $300 million in revenues, while Webroot’s fiscal year2018 revenue was approximately $215 million. “We are also highly complementary, as while our businesses are adjacencies, they are distinct from what we do, with only tiny bits of overlap.”

Webroot can fairly be characterized as one of several Tier Two security vendors below the three companies who have led the endpoint security market for the entire century, with a core technology which is older and less attention getting then today’s next-gen AI-based endpoint companies, although Webroot has updated their technology in some areas.

“We would describe them not has having an older technology, but an established and proven product,” Guadagno said. “We were, however, impressed by their threat intelligence, which is very much state of the art. We are also very impressed by their ability to update their marketplace, as well as their emphasis on simplicity and ease of use. We have a philosophy of making things simple for end users, and they have the same approach.”

The major difference in the Go-to-Market models between Carbonite and Webroot has been the nature of their respective channels. Webroot has about 14,000 partners, while Carbonite is more closed-mouthed about their channel size, indicating only that it was much smaller than Webroot’s. An even bigger difference though is their VAR-MSP balance.

“We are much heaver on the VAR side, while they are much heavier on the MSP side,” Guadagno said. “We have a very small number of MSPs, so any overlap would be irrelevant.”

Carbonite has integrated all their acquisitions to date. The different business focuses and business models may warrant retaining the Webroot organization to manage the managed services business. Or it may not. The point is that we don’t know, and won’t until the deal closes later in Q1.

“All of these things are related, but of course just how they are related and how they can create value for partners and customers is the secret we are all trying to figure out,” Guadagno said. “Every vendor, every customer, every MSP and every VAR believe these can see the best way to success. The guiding question is under what conditions can we best deliver real value to everyone involved.”

We don’t know at this stage whether the Webroot brand will be retained either, although Guadagno offered a glimmer of a hint on this point.

“There will be a lot to say after deal is closed, and on the name in particular, we want to make sure we come to the right conclusion,” he said. “We would look to capitalize on their value wherever possible, but we can’t say anything official until the deal closes.”

Before their acquisition, Webroot was busily knitting their own offerings into a uniform platform strategy, and had a very aggressive strategic partnering strategy with RMM vendors. They have a particularly strong and exclusive relationship with Continuum, but also have relationships with Atera, Datto, NinjaRMM and Kaseya. What becomes of that strategy going forward? The Atera, Continuum and NinjaRMM relationships would likely only be enhanced by the new model, but Datto and Kaseya both compete with Carbonite, and continued partnership with Carbonite/Webroot could put these RMMs endorsement of collaboration between competitors in their space to the test.

“We will continue to try and work with any vendor partner who has solutions that our partners and customers want,” Guadagno said. “We are very much in favour of that, and we would hope that every other vendor would be the same. Once we get past closing, we will look closely at the unique value that we and these other partners bring, and will look at all those relationships then, based on what we hear from MSPs and VARs.”