By Alec Klein
Washington Post Staff Writer
Saturday, March 10, 2007
Security software maker Sourcefire debuted yesterday as a public company, and its share price nudged up 3.3 percent on the first day of trading. The market value of the Columbia company reached of $358 million, far exceeding its price when national security concerns scuttled an Israeli firm's attempt to buy Sourcefire in 2005.
The company sold shares in its initial public offering at $15 each, above analysts' $12-to-$14 forecast, and raised an estimated $71.8 million. Sourcefire closed at $15.49 a share on the Nasdaq Stock Market.
Sourcefire, which makes software that detects, monitors and blocks unauthorized access to computer networks, plans to use the money for working capital and general corporate purposes, according to public filings. Its software is used by more than half of the 30 largest U.S. government agencies -- including the FBI, the Department of Defense and the Department of Homeland Security -- and by government contractors such as Lockheed Martin, according to company records.
Sourcefire's ties to the intelligence community raised concerns when it agreed in October 2005 to be acquired for $225 million by Check Point Software Technologies, an Israeli company. The federal Committee on Foreign Investment in the United States expressed concerns about national security. Sourcefire's commercial product -- based on software called Snort because it "sniffs" data to detect network breaches -- is founded on an open-source program, meaning that people can download it for free and see how it was written. In March 2006, the companies canceled the deal.
With its IPO, Sourcefire is capitalizing on growing demand for computer security software, but it must compete against bigger companies, including McAfee. Sourcefire attracted $56.6 million in venture-capital funding even as other high-tech start-ups sought to be acquired rather than go public because of the relatively high cost of complying with accounting regulations.
The company declined to comment yesterday, other than in a prepared statement in which chief executive Wayne Jackson said that "everyone at Sourcefire is excited about passing this important milestone and entering the next phase of the business as a publicly traded company."
Sourcefire was founded in 2001 by a software engineer. Its revenue rose 36 percent, to $28.9 million, for the nine months ended Sept. 30, 2006, from $21.2 million in the comparable period in 2005. Sourcefire has yet to post an annual profit, but its upward trajectory is appealing to investors, an analyst said. "It seems we're on the cusp of breaking into uncharted financial territory, which is a big draw for investors," said David Menlow, president of IPO Financial Network, a research firm in Millburn, N.J.
Staff writer Kim Hart and staff researcher Richard Drezen contributed to this report.