Business Value of Proofpoint’s Offerings

• Suppresses spam and email-borne viruses, so users time isn’t wasted.
• Helps ensure sensitive information (e.g., customer bank account numbers, intellectual property) isn’t sent to people it shouldn’t be sent to.
• Archiving of emails, for easy search and access, to respond better to lawsuits, and to satisfy laws and regulations requiring such archiving.

Current Offering

• Email-based spam, phishing, and virus control; policy-based encryption.
• Filtering of outbound information to prevent data leaks. This covers many types of content, including email and attachments, webmail, files, FTP, instant messaging, and blog postings.
• Archiving (SaaS only, through recent Fortiva acquisition).
• Secure file transfer. This is a secondary offering, and not described on Proofpoint’s Web site.
• FTP, HTTP scanning, for data leak protection. This is a secondary offering, and not described on Proofpoint’s Web site.
• Majority of components can be purchased as customer-premises software (option to run as virtual device), customer-premises appliance, or SaaS.
• Majority of products have same code base across customer-premises software, customer-premises appliance, customer-premises virtual device, SaaS.

Customer Sweet Spot

• The majority of customers are medium-sized (250 employees+) and large organizations.

Company Statistics

• Founded 2002.
• Revenues: privately held, not disclosed. Ferris Research estimates current rate at $40M annually.
• Growth rate: GAAP revenues for calendar 2007 were up 50% on calendar 2006; calendar 2008 projected at 70% over calendar 2007. (Source: VP Marketing Sandra Vaughan, August 13, 2008.)
• Financing to date: $86M. Last round 1Q08 for $28M, for acquisitions and growth; sources indicate a $300M valuation.

Main Competition

• Customer-premises: Cisco/IronPort and Symantec.
• SaaS: Google/Postini, MessageLabs in EMEA.

Main Competitive Strengths, as Perceived by Company

• Strong spam control: good catch rates with low false positives.
• Focus on email security, so can provide effective and personalized pre- and post-sales support for larger organizations.
• Customers can have dedicated SaaS environment separate from other organizations, helping to provide for privacy.
• Breadth of functionality: spam/virus/malware control, DLP, and archiving. Many competitors are limited to spam/virus/malware control.
• Spam effectiveness — higher catch rate with few false positives.
• Not distracted by an overreliance on sender reputation for spam filtering, which usefully strengthens the emphasis on content filtering.
• Strong archiving (via the recent Fortiva acquisition) — SaaS only.
• Multiple servers are managed as a unified, integrated system, from a single place — on-premise only.

Challenges

• Proofpoint’s focus today is primarily on email. It needs to extend the core capabilities to other protocols (e.g., IM, HTTP, FTP, print streams, file server I/O) and data at rest. That’s tough to do.
• The archiving capabilities delivered by the acquisition of Fortiva are an attractive enhancement to the SaaS offering. It’s to be regretted that these capabilities aren’t provided by the customer-premises offerings.
• Proofpoint’s technology is mainly located at the Internet boundary. To build a strong content control offering, it needs to extend its technology to the interior of customers’ networks.
• An important strength is the integrated, single point of administration of the spam/virus/malware/DLP technology. However, Fortiva’s archiving and e-discovery code base is entirely separate, and will need to be integrated. That’s tough to do, and is likely to detract from the single-point-of-administration strength.

Other Comments

• Company is doing well. It’s a survivor among the myriad spam control firms that have appeared and disappeared over the last few years.
• Company hopes for an IPO in 2009; an acquisition is also an obvious exit route for investors.
• There are no immediate plans to integrate the Fortiva SaaS archiving service into the core Proofpoint offerings.
• SaaS offering was launched in 2008; it’s doing well and Proofpoint estimates it will constitute around 20% of revenues by the end of 2008.
• Proofpoint sells exclusively through channels for the SME market. These are typically systems integrators such as SBS Security and Fish.Net. This is a bold commitment to its partners.
• Proofpoint also has a strong direct sales and support organization aimed at larger organizations; but even here, all these sales are in collaboration with partners.

… David Ferris