Last Friday the SEC released its new roadmap for migrating U.S. companies from U.S. GAAP (Genreally Accepted Accounting Principles) to IFRS (International Financial Reporting Standards).  According to the article:

"...all publicly traded U.S. companies would be required to use IFRS within six years. However, at least 110 companies could use the international rules as early as next year, depending on their size and their industry. The SEC predicts that those companies would each incur about $32 million in additional costs in the 10-Ks they file in 2010."

For everyone else, the SEC estimates that U.S. companies will spend between 0.125 percent and 0.13 percent of their revenue on making the transition to international financial reporting standards from U.S. GAAP in the first year of filing.  This is just more evidence that the new revenue stream the accounting firms have been waiting for is here. Some of my former Big 4 colleagues (including a partner) have come out and told me as much.  The big difference though between SOX and IFRS is that once companies have made the transition, that's it.  In other words, unlike SOX, IFRS has an end date.

It should also be noted that this timeline could change once Barack Obama takes office in January.  SEC chairman Christopher Cox is a Republican, and he has indicated he will resign early next year. Comments to the roadmap are due in mid-February, so we'll have to wait and see what the final version will look like.

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Last week, U.K.-based Marshal and U.S.-based 8e6 Technologies announced that they are merging to create a company that will offer a suite of products to protect corporate and web-based e-mail, instant messaging, and web surfing. While the deal was nearly a year in the making, the new combined company - Marshal8e6 – has wasted no time in driving their 250 person global team since the papers were signed on November 12th. During this flurry of activity, we were fortunate enough to get some time with Marshal8e6’s Senior VP of Corporate Development, Paul Myer to pepper him with questions about the new company and where they are headed.

Myer works out of the company’s headquarters in Orange, CA, the same building where he was President and COO of 8e6 Technologies. He is joined by longtime 8e6 colleague George Shih, former 8e6 CEO, who is now the interim CEO of the combined entity (pending a new CEO search) and President of the Americas region. Meanwhile, across the pond, Bruce Green, former CFO of Marshal, will be President, International operating out of the international headquarters in Basingstoke, UK while Ed McNair, former Marshal CEO, and now Chief Strategy Officer, busily packs his bags for the move to Orange, CA in January.

Once a deal was hammered out, both firms moved quickly, this was easy according to Myer since both firms were privately held. The exact financial details are not public, but from our discussion, we know that Updata Partners invested $10 million into the deal. James Socas joins the board as a result, bringing his experience in M&A work from Symantec with him. Socas feels that investing in a down economy is like bargain shopping and the cash infusion will empower the new firm to go out and look for technology buys that fit the growth model.  Look for him, McNair and Myer to start shopping for good deals in this down market with that $10 million warchest. We speculate that they may move into enhancing their perimeter protection play by picking up some technology around intrusion prevention or more traditional firewall. This would give Marshal8e6 a significant boost in terms of competitive advantage against the larger players.

The combined trailing revenues are about $50 million per year, and the team has plans to grow that to $100 million by 2010. This aggressive growth plan includes strong upselling/cross-selling to respective markets (Marshal strong in EMEA, 8e6 in Americas) and technologies. With 75% of Marshals’ past 12 months of revenue from the mail security products, this is fertile ground for 8e6’s mature content filtering technology. Similarly, 8e6’s market strength around web filtering makes a compelling case for layering on messaging protection. The cross-sell opportunities gain momentum from the rapid work toward integrating the product lines that has already started.

According to Myer, the #1 development priority is to integrate Marshal’s existing TRACE threat lab and 8e6’s web site databases into a single threat store that feeds both sides of the business. Within the next week or two, they expect the TRACE database to be feeding the 8e6 platform live data. By Q1 they expect tighter integration of the data and feeding the Marshal platforms with 8e6’s store of malicious sites. This is a boon for blended threat attack detection and speaks volumes of the positive working relationships the two companies have formed over the past year. The sheer speed of the integration efforts, and the rapid value addition, if sustainable, should give them a leg up on competing with more entrenched players in the market. The larger companies (Symantec, McAfee, CA, etc.) are still suffering indigestion from their rounds of acquisitions and in most cases have had a difficult time integrating technologies.

The future product roadmap includes merging the reporting products into a single appliance that can manage and report across both messaging and web defense appliances. The early expectation is that the first phase of this will be completed in Q2 2009. Future integration of the defensive appliances may include a single hardware footprint for unified threat protection. This also is a clear winner when it comes to minimizing the total installation footprint, as well as giving strong messaging to the sales and channel teams. We expect some serious cross-training of the new combined channel to enable rapid cross-product adoption in each market.

Speaking of the channel, it will remain largely untouched for now, as will technical support, with both companies continuing to operate much as they always have. This is a huge relief for the customers of the combined company since there will be little to no disruption to their support mechanisms, something else the big boys have struggled with in nearly every way with their acquisitions.

We look forward to seeing how Marshal8e6 fairs in the coming months, and whether or not they can continue their blistering pace on the integration front. If so, then we think they will have a compelling story to start the new year with, and one that should make the competition take notice.

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