Tech security companies are hot acquisitions

SEATTLE -- Despite Wall Street's struggles, big bets continue to be made in one seemingly recession-resistant industry: tech security.

Antivirus giant McAfee mfe on Friday said it will acquire Solidcore, maker of security systems for ATMs and cash registers, for $33 million cash and perhaps $14 million more, if Solidcore meets performance targets.

That makes 55 acquisitions of security firms in 2009, a pace that could surpass the 120 security companies snapped up in 2008, according to America's Growth Capital (AGC).

"There is a surge of activity going on," says Ben Howe, CEO at AGC.

It's not just limited to anti-virus giants McAfee, Symantec symc, Trend Micro, Sophos and CA ca. Tech giants Cisco csco, IBM ibm, Oracle orcl, EMC emc, Hewlett-Packard hpq and even Google goog have been buying up smaller security firms, too.

Prices are attractive because the venture capitalists who invested in promising security start-ups a few years ago can no longer count on cashing in by going public, because the market for initial public offerings has dried up, says Jay Beaghan, managing director for security acquisitions at Imperial Capital.

Yet, cybercriminals continue to infect e-mail, Web pages and social networks with data-stealing programs and financial scams. Cyberspies are increasingly cracking into databases at companies and government agencies to swipe sensitive commercial and military data.

"Hackers and bad guys continue to innovate," says Beaghan. "This supports an ongoing level of investment activity in the sector."

Meanwhile, expectations are running high in the tech-security, military and intelligence communities that the federal government will begin to spend more on cybersecurity. And President Obama is widely expected to usher in new policies to compel the corporate sector to beef up cyberdefenses, as well.

"The government is starting to better protect its own systems," says Amit Yoran, CEO of security firm NetWitness. "Ultimately, the mind-set that security matters will translate into new regulations and programs affecting private industry."

So the tech giants have begun strategically positioning themselves to get a larger piece of a growing security pie — by shopping for smaller security firms to round out their portfolio of services. "It certainly is a buyer's market," says Rocky Pimentel, CFO of McAfee, which has spent about $2 billion on 16 other acquisitions since 2002.

QinetiQ, a British company with 6,400 employees and more than $1 billion in annual revenue, recently said it will spend $40 million to acquire Cyveillance, a 75-employee firm with technology to locate malicious programs and stolen data on the Internet.

QinetiQ CEO Graham Love says Cyveillance's technology "complements our portfolio" and will help QinetiQ, which supplies security systems to defense agencies, "benefit from the increased importance that the U.S. administration is placing on addressing cybersecurity."