Cloud Security
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Cloud-Native Application Protection Platform (CNAPP)
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Endpoint Security
Sluggish Sales Growth and Lower Relevance in Endpoint Could Make Trend Attractive
Endpoint security vendors are changing up their ownership or business models as Microsoft and CrowdStrike increasingly blot out the sun in this rapidly consolidating market.
See Also: On-Demand Webinar | Stopping Cyberattacks in the Cloud
The Seattle-area cloud computing giant and Austin, Texas-based platform security titan now control nearly 44% of this $12.6 billion market, with both growing considerably faster than the market as a whole, IDC found. This has left the next four largest endpoint security players – which combined control just 20% of the space and are growing slower than the market as a whole – scrambling for answers.
The third-largest endpoint security vendor is Trellix, which last month saw its CEO depart and is now sharing the top executive of sister company Skyhigh Security. Coming in fourth is Broadcom, which in March merged its Symantec and Carbon Black businesses to gain more scale. Taking fifth place is Sophos, which earlier this month closed a $859 million buy of Secureworks to expand its security services footprint.
Now the world’s sixth-largest endpoint security vendor might by eyeing a new home outside the public markets. Reuters said Thursday that Advent International, Bain Capital, EQT AB and KKR have expressed interest in recent weeks in taking Japanese vendor Trend Micro private. The update comes six months after Reuters initially reported that Trend Micro was exploring a sale after attracting buyout interest.
Trend Micro’s stock is up $15.27 – or 25.1% – to $76.14 per share since the latest Reuters report came out, which is the highest the company’s stock has traded since February 2001. Reuters cautioned that a deal is not guaranteed and Trend Micro could choose to remain independent. Advent and KKR declined to comment, while Trend Micro, Bain and EQT didn’t immediately respond to requests for comment (see: CrowdStrike, Microsoft, Trend Micro Top EDR Forrester Wave).
How Trend Micro’s Endpoint, Cloud Businesses Are Faring
Endpoint security is a significant operating segment for Trend Micro, contributing more than 30% of the company’s $1.63 billion of revenue in 2023. But growth is very meager, IDC found, with Trend Micro’s endpoint security business growing more slowly than any of the seven market share leaders. In the first three quarters of 2024, Trend Micro said its overall sales are up 10.3% to $1.33 billion.
Gartner in September rated Trend Micro’s endpoint protection platform in fifth place behind CrowdStrike, Microsoft, SentinelOne and Palo Alto Networks. The technology analyst firm praised Trend Micro for its market understanding, product strategy and overall viability, but criticized the company for its sales strategy, sales execution and geographic strategy.
Trend Micro is faring better in the $3.5 billion cloud-native application protection platform space, where the company sat atop the space in 2023 with 13.1% share, IDC found. But Trend Micro’s lead is shrinking each year since the company’s 11.3% annual growth rate lags the market growth rate of 31.5%. Despite Trend Micro’s heritage, the company’s endpoint business today is just 12% larger than its CNAPP sales.
Forrester last year rated Trend Micro’s cloud workload security the sixth-best behind CrowdStrike, Palo Alto Networks, Microsoft, Wiz and Check Point. The technology analyst firm praised Trend Micro for its strong agent-based and agentless cloud workload protection and risk detection and response, but said the company’s admin user management, CSPM, CIEM, container orchestrator, and IaC scanning lag.
How Potential Private Equity Suitors to Trend Micro Stack Up
Trend Micro has been much less acquisitive than its peers, with its only disclosed transaction of the 2020s being the tuck-in purchase of SOC technology provider Anlyz. Prior to that, the company’s most recent acquisition came in October 2019, when Trend Micro bought startup Cloud Conformity for $70 million. That’s in stark contrast to rivals such as CrowdStrike, which has made seven acquisitions since 2020.
Most of Trend Micro’s suitors have a footprint in cybersecurity. Advent took Forescout private in a contentious $1.4 billion sales in 2020, and teamed up with Permira to buy McAfee in 2022. KKR bought Barracuda for nearly $4 billion in 2022, has owned cybersecurity services provider Optiv for many years, and made a follow-up investment into offensive security testing vendor NetSPI in late 2022.
Bain Capital led a $190 million investment into managed detection and response provider Blackpoint Cyber in June 2023, and led a $40 million Series B funding round for ransomware prevention startup Halcyon in December 2023. EQT acquired a majority stake in security service edge stalwart Open Systems in 2017 and sold that to Swiss Post in September, but remains the owner of MDR firm Ontinue.
The public markets are home to large, well-capitalized cybersecurity firms with above-average market growth. Given that Trend Micro is losing ground to Microsoft and CrowdStrike on the endpoint and is likely to be surpassed in the cloud by Microsoft, Palo Alto Networks and CrowdStrike by the end of 2025, Trend Micro no longer fits the profile of a public cyber company. An exit via private equity seems logical.