Guardent Acquires DefendNet Solutions, Wins $20M In VC FundingGuardent Acquires DefendNet Solutions, Wins $20M In VC Funding

Security firm Guardent Inc. says it has agreed to acquire managed security services company DefendNet Solutions Inc. for an undisclosed amount of capital.

Analysts say the acquisition should help Guardent penetrate the small and midsize managed security market. DefendNet offers outsourced firewall administration, monitoring, and reporting. The Yankee Group estimates that the managed security market for small and midsize businesses reached $140 million last year and will grow to $1.7 billion by 2005. The Yankee Group expects to see many companies outsource firewalls, virtual private networks, intrusion detection, virus scanning, security assessments, and secure content management.

Guardent also landed $20 million in Series C equity financing led by Citigroup's e-Citi unit. Investors include Mercury Interactive (stock: MERQ), Charles River Ventures, New Enterprise Associates, and Sequoia Capital.

Guardent's news comes after a few firms in the security market, including Pilot Networks and the Salinas Group, went under, possibly marking the beginning of the end for managed security firms that are executing poorly or are cash limited.

Gartner security analyst John Pescatore says he expects to see more consolidation in the managed security space. "There are going to be a lot of companies in this space that don't have the cash to survive it alone during the economic downturn," he says. "Many of these companies are billing $100,000 a month while burning $1 million to $2 million in salaries."