Kaspersky Plots Enterprise Growth As Investment Firm Takes Major Stake

Private investment firm General Atlantic on Thursday became the second largest shareholder in security and anti-virus vendor Kaspersky Lab, making it No. 2 only to founder and CEO Eugene Kaspersky.

While Kaspersky would not reveal the financial details of the deal, Vedomosti, the Russian-language business daily, is reporting that a Kaspersky shareholder sold a 20 percent stake to General Atlantic (GA) for roughly $200 million. Kaspersky on Thursday would not confirm or deny that report.

"As by confidentiality agreement, we cannot comment on the exact amount of shares and the deal value," Eugene Buyakin, Chief Operating Officer, Kaspersky Lab, said in an e-mail to CRN. "But I can say that GA becomes second largest shareholder after Eugene Kaspersky. No financial details on the deal are being disclosed."

According to Buyakin, bringing aboard General Atlantic will help fuel international growth for Kaspersky, mainly in the U.S. It will also help Kaspersky build out its channel strategy.

"We believe partnership with General Atlantic will contribute greatly to our channel strategy. Attracting a world-class investor such as General Atlantic is a testament to our strong financial performance and potential for future growth -- GA invests only in what it considers to be strong companies with significant future growth potential. That is a good contribution to our brand profile that raises Kaspersky Lab's credibility on the market which is very positive for channel," Buyakin said. "Partnership with General Atlantic is a good contribution to our channel strategy development, especially if we speak of corporate market as it will help us to partner with larger organizations we couldn't reach before."

John Lane, CEO of Logical Front, a West Jordan, Utah-based Kaspersky partner, said Kasperksy has been working diligently to build up its portfolio to attack the enterprise market with a full suite of security solutions. Having backing from General Atlantic could help with that push.

"This is to help them build out their portfolio so they have what enterprises are looking for," Lane said, adding that Kaspersky sometimes loses deals to Symantec and other competitors due to holes in its portfolio.

Bringing aboard General Atlantic will also help Kaspersky increases its name recognition and visibility in the U.S., where it has struggled to gain a major foothold compared to its presence internationally.

Some Kaspersky partners, however, are eyeing the deal with caution.

"[Investment Firms] scare me," said Jay Tipton, CEO of Fort Wayne, Ind.-based Technology Specialists. "All they're looking for is a return on their investment. They don't see a tangible value in a relationship."

Next: Does The GA Deal Mean A Kaspersky IPO?

Tipton said he fears that the deal with GA will alter Kaspersky's channel strategy, and channel friendliness and that it could lead to a shrinking of Kaspersky's channel organization if cost cutting becomes a necessity. Tipton added that he worries the deal could lead to higher prices.

"Hopefully, my concerns are wrong," he said.

Buyakin said it chose General Atlantic to partner because it would help Kaspersky grow, invest in future technology and expand further. He said GA knows the software industry cold and is in a strong position to boost business for Kaspersky. One key area Kaspersky will focus is in the endpoint security market, but it also wants to bulk up its portfolio to embrace cloud computing, IT consumerization and the creation of technologies to address the threats of the post-PC era.

"At present Kaspersky Lab plans to remain focused on the endpoint security market with balanced investments and equally aggressive targets in consumer and corporate sectors," he said. "Having GA on board with their vast expertise in IT sector and global network we believe we’ll increase our market share in both segments."

Buyakin said M&A will likely play a role as Kaspersky continues to develop products and its strategy and it will tap General Atlantic's expertise in that area, however, the company has no set buyout targets.

"Whilst we have no specific M&A plans at this time, we are open to evaluating opportunities," he said.

Under the General Atlantic agreement, Kaspersky will remain a private company, and Buyakin said an IPO isn't on the horizon in the near term.

"At this stage of the company's life cycle we think it's beneficial for Kaspersky Lab to stay private and remain focused on organic growth of the business and long-term investments in R&D," he said. "When the time is right the company will go public and use access to the capital markets as an additional instrument for its business and strategic development."