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Sourcefire Sold to Israeli Company

Sourcefire Sold to Israeli Company
Sourcefire Sold to Israeli Company 

By Ellen McCarthy
Washington Post Staff Writer
October 7, 2005

Sourcefire Inc., a Columbia software firm that began as a pet project
of computer-coding hobbyists, is being bought by Israeli security
giant Check Point Software Technologies Ltd. for $225 million, marking
one of the area's most prominent recent start-up successes and a
victory for the open-source software movement.

Check Point, which sells firewall software to nearly 80,000 customers
worldwide, will pay cash.

Sourcefire's roots go back to 1998, when software programmer Martin
Roesch sat in his Carroll County apartment and wrote a few lines of
code he thought might help detect a computer virus or hacking attempt.

Over the years, Roesch's online friends and fans added to the code --
which he has kept out in the open on the Internet for all to see -- to
create an advanced network security system that has been downloaded by
more than 2 million people.

"This was a little weekend and rainy day project that kind of ran
amok," said Roesch, 35, who will work for Check Point after the
acquisition. "It's incredible."

The technology, called Snort, has developed a following of loyalists
who watch for new versions and spend hours discussing how to advance
the software. Like most intrusion detection systems, Snort patrols
computer networks looking for worms, viruses and other potential
threats, and alerts security personnel when it finds one.

The basic version of Snort remains free, but Sourcefire has attracted
about 800 paying customers by packaging it into a more user-friendly
product that includes reporting capabilities, analysis technology and
customer support features. Sourcefire executives compare the
arrangement to giving away an engine, but offering a whole car for

That and similar methods of marketing around open source software are
changing the dynamics of an industry that traditionally guarded its
trade secrets closely, lowering prices and increasing competition in a
way that has forced even technology giants like Microsoft to pay

"It is probably the biggest movement and impact on software since what
happened with the Internet in the 1990s," said Gary Hein, a senior
analyst at the Burton Group who has studied the open-source movement.

Companies such as International Business Machines Corp., Apple
Computer Inc. and Hewlett-Packard Co. have developed strategies to
adopt open-source technologies. Microsoft Corp., long seen as the
chief rival of the open source community, has established a lab at its
Redmond, Wash., headquarters to study Linux, the most widely used
open-source operating system.

By 2008 the impact of open-source technologies -- including sales of
open-source-based products and money lost by traditional vendors --
will exceed $5 billion, according to Garner Inc., and analysts say
that is just the beginning.

Roesch turned Snort from a hobby into a company in 2001. At the time,
he recalled, he had "heard of business models, but never seen one."

With $100,000 in angel funding, Sourcefire began selling a more
polished version of Snort that came with service guarantees and help
with installation. After Sourcefire landed some major clients it was
able to raise $33.65 million in three rounds of venture funding. Its
investors include Greylock Partners of San Mateo, Calif.; Sierra
Ventures of Menlo Park, Calif.; and New Enterprise Associates of

Wayne Jackson, a seasoned technology entrepreneur, joined Sourcefire
in 2002 to steer the company toward fast growth.

"When I first heard it I thought it was a crazy idea," said Jackson,
the chief executive. "The notion of taking something that was
otherwise free and commercializing it wasn't intuitive."

Licenses for Sourcefire's products, some of which have been developed
on a proprietary basis, start around $4,000 and go as high as
$120,000, depending on the complexity of the product.

Check Point's chief executive, Gil Shwed, said Sourcefire's technology
will eventually be embedded in all its products. The Israeli firm's
firewall systems work to block the same attacks that Sourcefire's
software detects.

The market for computer security systems has boomed in recent years.  
But analysts caution that the market for firewalls is now largely
saturated, forcing Check Point to branch into new lines of business.  
In 2004, Check Point earned $248.4 million, up only slightly from the
$243.9 million profit it recorded the previous year.

"The firewall market isn't going anywhere," said William R. Becklean,
an analyst with Oppenheimer & Co. The Sourcefire purchase is a way for
Check Point "to try and maintain the growth of the company," Becklean

Some investors balked at the price of the acquisition, sending shares
of Check Point down $2.20, to $21.50. Under the terms of the deal,
which is expected to close in the first quarter of next year, Check
Point will also assume Sourcefire's stock option plan. No layoffs are
expected among Sourcefire's 150 employees.

=A9 2005 The Washington Post Company

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