Blue Coat to Acquire Packeteer

WAN optimization and acceleration vendor Blue Coat is acquiring competitor Packeteer for $268 million, a deal that could signal more consolidation to come in the networking sector.

At stake is a piece of the growing WAN optimization market which Infonetics
predicts will be worth $1.2 billion by 2010
. The combined Packeteer Blue Coat offering will provide additional acceleration capabilities to Blue Coat’s product portfolio.

“The reason behind this is primarily to take advantage of technology that is within the Packeteer Packet Shaper product in particular, that includes application classification as well as traffic management functionality,”
Bethany Mayer Senior Vice President of Worldwide Marketing at Blue Coat told “Those capabilities Packeteer has had for many years and has done quite well and that is technology that we think provides us with a strong advantage in WAN optimization.”

Mayer also noted that Packeteer has a strong channel and sales organization that will also benefit Blue Coat.

Blue Coat today already does some of the same things that Packeteer does in terms of application acceleration. Mayer argued however that Packeteer’s technology goes above and beyond what Blue Coat on its own currently has in the market.

“We do offer application acceleration, quality of service, caching security and compression as well,” Mayer said. “The Packeteer quality of service capabilities that they have are just very granular and very deep and beyond frankly what anyone in the industry offers today.”

Mayer noted that Packeteer can classify over 500 applications and has numerous patents on their technology. Application identification is a key enabler for WAN optimization and one that
in the industry including Riverbed, Juniper and others focus on as well.

The combined Blue Coat Packeteer offering is expected by Mayer to give Blue Coat a competitive edge. Mayer commented that in Blue Coat’s view the requirements for WAN optimization are changing. The movement is going from an accelerate everything approach to a more granular approach where users first identify applications to accelerate.

Mayer expects that over time the Packeteer brand itself will be consolidated into Blue Coat. Though in the short term Packeteer products will continue under the Packeteer name and Blue Coat will continue to add features to the Packeteer product line.

Overall though, the expansion of Blue Coat’s WAN acceleration lineup is something that Mayer expects to see continued growth in 2008 and beyond.

“Folks are still doing server consolidation as a part of cost savings and the market is still evolving,” Mayer said. “But we’re selling WAN optimization in a broader sense in the enterprise. Instead of it just being a pilot, generally now they are full fledged deployments.”

Blue Coat expects that the deal will close in the second quarter of calendar 2008. The deal is being funded by a combination of Blue Coat’s available cash as well as an $80 million convertible notes financing.

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