Sources: Tanium Rejected Acquisition Bids From VMware, Palo Alto, Vows To Stay Single

Red-hot security startup Tanium received acquisition bids from both VMware and Palo Alto Networks last fall, sources familiar with the offers told CRN.

VMware's bid to acquire Tanium, which was rejected by the company, came shortly before the startup raised $120 million in additional venture capital funding last September, which gave it a valuation of $3.5 billion, one source with knowledge of the offer said. That funding added to the $52 million it had raised from Andreessen Horowitz earlier in the year, bringing the Emeryville, Calif.-based company's pool of venture capital funding to date to $262 million.

Sources said Tanium's lofty valuation, combined with Dell's $67 billion bid in October to acquire VMware parent EMC, prevented the acquisition talks from progressing further. VMware declined to comment on the bid.

[Related: VMware Inks OEM Deal With Endpoint Security Startup Tanium, Aims To Ease Windows 10 Migrations]

Earlier this week, VMware revealed an OEM agreement with Tanium and said it's using the startup's technology in a new endpoint security and management offering called TrustPoint.

Palo Alto Networks also put in at least one bid for Tanium in excess of $3 billion last fall, sources told CRN. The bid came after Tanium and Palo Alto Networks forged a strategic alliance last August to bring together the visibility and monitoring capabilities of Tanium with Palo Alto Networks' WildFire threat intelligence offering. Palo Alto Networks did not respond to requests for comment on the bid.

Tanium CEO Orion Hindawi dodged questions about the VMware and Palo Alto Networks bids in an interview with CRN prior to the VMware partnership, but said at least 20 companies have approached Tanium about an acquisition.

"If you make a list of the companies likely to acquire Tanium, the vast majority have come to us," Hindawi said when asked about the Palo Alto Networks bid. Those acquisition inquiries have ranged from talks about a deal to concrete paper offers, he said.

"We have had partnership talks with a lot of companies, and a lot of them veer into wanting to acquire Tanium," Hindawi said when asked about the VMware bid.

"We've been really clear with Tanium that acquisition is not part of our strategy," Hindawi said, noting that Tanium has never countered an offer from another vendor for acquisition. "It's just not something that we're interested in at all."

So what's Tanium got that everybody wants? For one thing, it's growing, and its sales trajectory is strong, Hindawi said. The company had $70 million in revenue in 2014, $200 million in 2015 and expects to hit $400 million this year, he said.

Tanium's peer-to-peer technology lets organizations continuously scan all endpoints in a network to detect vulnerabilities and unmanaged devices. The technology is important as companies look to ramp up their security and management of endpoint devices, which Tanium helps discover and secure.

Under the newly forged partnership, VMware has paired Tanium with its own technology to create TrustPoint, which aims to ease and automate Windows 7-to-Windows 10 migrations.

Tanium also has announced technology and services partnerships with PricewaterhouseCoopers, Splunk and iSight Partners (now part of FireEye). Hindawi said at least four more partnerships are "imminent."

The channel is also a big piece of Tanium's growth plans, Hindawi said, noting that the company plans to expand the number of employees it has working with the channel and is adding key solution providers to its partner ranks.

"We're starting to shift further and further toward the channel-friendly view because it's working," Hindawi said.

Tanium has already signed up around two dozen of the biggest security names in the business as channel partners, including Optiv Security, the Herjavec Group, GuidePoint Security, Thundercat Technology, Gotham Technology Group and Sayers.

"[Tanium's solutions] are definitely giving us -- the ones who are good enough to understand what they do -- a different way to talk to our customers rather than talking about products," said Jamie Shepard, senior vice president of healthcare and strategy at Addison, Texas-based Lumenate.

That being said, Shepard said the technology isn't directly driving a lot of deals for his company yet.

Hindawi said Tanium's growth plans also include focusing on international expansion and working toward an initial public offering.

"I think our path is to go public," said Hindawi, who took over the role of CEO in February from his father and fellow co-founder David Hindawi. David Hindawi now serves as executive chairman of Tanium.

The father-son duo's past experience as entrepreneurs shapes the younger Hindawi's aversion to acquisition. The pair co-founded enterprise systems management vendor BigFix and sold it to IBM in 2010, and experience Orion Hindawi described as "brutal."

However, CRN did speak to at least one former partner of Tanium, who said they ended their partnership with the vendor because they "disliked their business practices."

Solution providers said they expect Tanium to go for a high premium if it is sold.

"It will have to be a big company that wants an ecosystem," said one partner executive, who did not want to be named. The partner said VMware's overture to buy they startup made sense because Tanium would be a "good fit for what they do," as the company's technology would solve VMware's "discovery problem" when it comes to security and patching. Other vendors that would pair well with Tanium as potential suitors include IBM, HPE and Symantec, solution providers said, although Symantec in the meantime has disclosed plans to acquire Blue Coat Systems.

Kevin McLaughlin contributed to this story