Insights From St. Bernard’s CEO on Red Condor Acquisition
When San Diego’s St. Bernard Software announced last week that it was acquiring the assets of Rohnert Park, CA-based Red Condor, CEO Lou Ryan was not available to explain the deal, which was a somewhat-involved transaction.
When I finally caught up with Ryan by telephone, he explained that in addition to buying Red Condor’s e-mail spam-filtering technology, two of Red Condor’s longtime venture investors also made an investment in St. Bernard Software (OTCBB: SBSW) and have joined the board. As part of the deal, Menlo Park, CA-based RWI Ventures and Redwood City, CA-based ATA Ventures, along with certain individual investors, put $3 million into St. Bernard for notes that convert to St. Bernard shares, with a $1.10 conversion price. That might seem optimistic, considering that St. Bernard closed at $0.55 a share yesterday, but the stock has basically doubled since the deal was announced a week ago.
Both of the VC partners involved also have experience with networking technology companies, including both optical and wireless networks. ATA Ventures managing director Mike Hodges, who is joining St. Bernard’s board as a non-voting observer, was the interim CEO at Tellium, an optical networking company spun out of Bellcore in 1997 as a joint venture with SAIC and Ortel. RWI co-founder William Baumel, who joins St. Bernard’s board as a regular director, was a founding shareholder and chairman of Optical Solutions, which was acquired by Calix, and a founding shareholder of NextNet, a Wi-Max equipment provider acquired by Clearwire Communications.
St. Bernard now has a four-member board, with one board observer, Ryan said.
As I’ve reported previously, Ryan is a software industry veteran and former venture partner at Menlo Park, CA-based Sand Hill Capital who stepped in as CEO at St. Bernard about 17 months ago. So the Red Condor deal represents the opening gambit in his new strategy for the San Diego network security specialist.
St. Bernard’s core technology is iPrism, a network appliance installed on customer networks to help them manage their Internet access and filter Web content as part of a hosted solution.
Red Condor has developed a similar appliance and hosted solution approach, and Ryan says St. Bernard is now looking to build on the technology platform that Red Condor created. In addition to providing e-mail content filtering, archiving, and indexing capabilities, Red Condor’s team is looking to add new features, such as data leakage protection.
It also stands to reason that St. Bernard would combine its appliance and Red Condor’s into a single network device, but Ryan didn’t want to go there. “With respect to how this all converges with iPrism, there are a lot of things we’re looking at,” he says ambivalently.
As part of the acquisition, St. Bernard extended job offers to 34 of Red Condor’s 40 employees. A St. Bernard spokeswoman says more than half of those (19) are engineering staffers, including co-founders Jeffrey Aguilera, Dave Brounstein, and Brien Voorhees.
“The platform they’ve developed is very scalable and robust,” Ryan says. “The beauty of this is that we have a platform now that gives us lots of flexibility.”