Blue Coat Systems
|Traded as||(1996-2011) NASDAQ: BCSI|
|Headquarters||Sunnyvale, California, United States|
|Greg Clark (CEO)
(President and COO)
|Products||ProxySG, Advance Threat Protection (ATP) System, SSL Visibility Appliance, MACH5, K9 Web Protection, PacketShaper, CacheFlow|
|Revenue||$598 million GAAP|
Number of employees
Blue Coat Systems Inc., formerly CacheFlow, is a corporation headquartered in Sunnyvale, California and owned by Symantec . It provides hardware, software, and services designed for cybersecurity and network management.
Blue Coat was founded in 1996 as Cacheflow, a business focused on caching appliances for internet service providers. After several rounds of funding, it filed an initial public offering (IPO) in 1999. Slow adoption of caching technology led to continued losses. In August 2002, the company changed its focus to internet security appliances and was renamed Blue Coat Systems. The company returned to private ownership in 2011, when it was acquired by Thoma Cressey Bravo. It was then sold to Bain Capital in March 2015 and Symantec in 2016.
Blue Coat's products have received generally positive reviews in lab tests. They are sometimes used by repressive regimes for censorship and surveillance.
Blue Coat was founded in March 1996 in Redmond, Washington by Mike Malcolm, Joe Pruskowski and Doug Crow, under the name CacheFlow. $1 million in seed capital was raised from angel investors, in order to develop caching appliances that would increase how fast websites load by storing frequently accessed web data in cache.
Malcom hired former employees from Scaleable Software to create the CacheFlow operating system. After completing product testing that October, investors purchased 25 percent of the company with $2.8 million in venture funding. Another $6 million was raised the following December and $8.7 million in March 1999. The company hired Brian Nesmith as President and Chief Executive Officer that month. Another $3.1 million in shares was purchased in November 1999 by Marc Andressen, whose reputation led to increased interest in the company's IPO.
In mid-1998, the company made its first sales, earning just $809,000 over three months, and investors started pushing for an initial public offering (IPO). The company filed an IPO the following November. CacheFlow was not yet profitable and the company itself said the market for caching appliances was still unproven. Despite having $6 million in annual losses, the stock price rose from $24 a share to $126 in the first day of trading and $161 by October 2000. At the time, analysts were expecting a large market for caching appliances, due to widespread frustration with internet speeds.
Blue Coat Systems
CacheFlow grew from $7 million in revenues in 1998, to $29 million in 1999 and $97 million in 2001. However, it already had 21-35[a] percent of the total market for its products and was still not profitable. The company lost 97 percent of its value from October 2000 to March 2001 as the dot-com bubble came to an end and the company reported continued negative profits. By 2002, several competing internet caching companies had abandoned the market, due to slow adoption of caching technology and most of CacheFlow's revenues were coming from its IT security products.
In August 2002, the company changed its name to Blue Coat Systems[b] and began focusing on internet security appliances. Its products were primarily used to control, monitor and secure internet use by employees. For example, a company could limit employee access to online gaming and video streaming, as well as scan attachments for viruses. According to The Record, "this may seem to create a creepy virtual Big Brother hovering over employees' shoulders," but some companies have a small number of users hogging bandwidth, exposing the network to malicious software, or leaking internal documents.
The shift in focus was followed by smaller losses and revenues at first and eventually company growth. Losses in 2002 after the rename were $247 million, about half of the prior year's losses and by 2005 it was profitable for the first time. As of 2003, the company had 250 employees and $150 million in annual revenue.
As Blue Coat System's financials improved, it was able to spend on acquiring IT security companies. The pace of acquisitions increased after Thoma Cressey Bravo acquired Blue Coat in 2011, and it acquired technologies needed to better compete with FireEye.
|Announcement date||Company||Business||Deal size||References|
|October 2000||Entera||Digital content streaming||$440 million|||
|June 2000||Springbank Networks||Internet devices||$180 million|||
|October 2003||Ositis Software Inc.||Antivirus appliances||$1.36 million|||
|July 2004||Cerberian||URL filtering||$17.5 million|||
|January 2006||Permeo Technologies||End point security||$60 million|||
|June 2006||NetCache[c]||Proxy caching||$30 million|||
|April 2008||Packeteer||WAN optimization||$268 million|||
|February 2010||S7 Software Solutions||IT research and development firm in Bangalore||$5.25|||
|December 2012||Crossbeam Systems||X-Series of security appliances||Undisclosed|||
|May 2013||Solera Networks||Big data security||Undisclosed|||
|December 2013||Norman Shark||Anti malware firm||Undisclosed|||
|June 2015||Perspecsys||Cloud security||Undisclosed|||
|November 2015||Elastica||Cloud security||$280 million|||
2009 - 2015
In 2009, Blue Coat went through a restructuring that included layoffs of 280 of its 1,500 employees and the closing of facilities in Latvia, New Jersey and the Netherlands. Revenues continued declining. The company was restructured in May 2011 and the CEO was replaced that August. Thoma Cressey Bravo acquired Blue Coat in December 2011 for $1.3 billion and returned it to private ownership.
In March 2015, Forbes reported that Blue Coat had pressured security researcher Raphaël Rigo into canceling his talk at SyScan '15. Although Raphaël's talk did not contain any information about vulnerabilities on the ProxySG platform, Blue Coat still cited concerns that the talk was going to "provide information useful to the ongoing security assessments of ProxySG by Blue Coat." The canceling of the talk was met with harsh criticism by various prominent security researchers and professionals alike who generally welcome technical information about various security products that are widely used.
In 2015, Blue Coat founded the Alliance Ecosystem of Endpoint Detection and Response (EDR) to share information about IT security threats across vendors and companies. Its first channel program was started that March and the Cloud Ready Partner Program was announced the following April. By 2015, the company had $200 million in annual profits and about $600 million in revenues, a 50 percent increase from 2011. That March, Bain Capital purchased Blue Coat from Thoma Bravo for $2.4 billion. Bain indicated that it hoped to launch another IPO and several months later, anonymous sources said the company was looking for investment banks for that purpose.
In June 2016, Blue Coat abandoned its plans for an initial public offering and accepted a $4.65 billion deal to sell to Symantec. The announcement was for the largest acquisition Symantec has made in a decade and would make the combined company the largest enterprise security business globally. Blue Coat CEO Greg Clark was named CEO of Symantec, a position that was left empty since April.
According to Network World, Blue Coat has "a broad security portfolio including hardware, software and services." It's biggest business is in products that filter web traffic on corporate networks. As of 2011, one of Blue Coat's most important products were Web gateways that scan internet traffic for security threats, authenticate users and manage encrypted traffic. Historically the company was best known for web gateway appliances and products to monitor and filter employee internet activity. It gained a broader product portfolio through a series of acquisitions. It now also has consumer products, such as parental control software.
Blue Coat's (then called CacheFlow) first product was the CacheFlow 1000, released in January 1998. It cached website objects users were likely to use repeatedly, to increase load speed. The CacheOS operating system was taken out of beta the following year and updated again for multimedia content in 2000. The CacheFlow family was expanded with the CacheFlow 100, the CacheFlow 500 and others. A competitive review of caching appliances in PC Magazine gave the CacheFlow 500 Editor's Choice. The editor said it had "excellent performance", a "plug-and-go" setup, and "good management tools. PC Magazine said its "most noteworthy features" were its DNS caching and object pipelining techniques, which allowed page data to be delivered in parallel, rather than sequential, streams.
CacheFlow's products were initially sold to internet service providers, but later products were intended for large companies. In 2000, it introduced the CacheFlow Server Accelerator product family, which offloads content delivery tasks from web servers. Tests by Network World found the Server Accelerator 725 increased website load speed eight-fold. The CacheFlow Client Accelerator 600 product family was also introduced that year. It was the company's first product family for corporate networks, caching Web or multimedia content directly on the corporate network. New features specifically for streaming media were introduced in 2001 under the name "cIQ".
In 2001, the company started adding IT security features. By early 2002, CacheFlow was on the fifth version of its operating system. The Security Gateway 600/6000 Series was the company's newest product family. It had a range of security features, such as authentication, internet use policies, virus scanning, content filtering, and bandwidth restrictions for streaming video applications. Network Computing tested a beta appliance and gave it a positive review. Later that year, the company was renamed to Blue Coat Systems to focus on security appliances and simultaneously released the SG800. The appliance sat behind corporate firewalls to filter website traffic for viruses, malware, worms and other harmful software. It had a custom operating system called Security Gateway and provided many of its security features through partners, like Symantec and Trend Micro. An InfoWorld review gave it an 8.4 out of 10.
In 2003, three new products were introduced for small and medium-sized businesses (SMBs) with 50, 100 or 250 users in bundles with Websense[d] and Secure Computing. This was followed by a second generation of the ProxySG product family, which added security features for instant messaging. A review in eWeek said the new ProxySG line was effective and easy to deploy, but the ongoing maintenance fees were expensive. In 2005 Blue Coat announced an anti-spyware appliance called Spyware Interceptor and the following year it announced upcoming WAN optimization products. This was followed by SSL-VPN security appliances to secure remote connections.
A free web-tool, K9 Web Protection, that can monitor internet traffic, block certain websites, identify phishing scams, was introduced in 2006. In a November 2008 review, PC World gave it 4.25 out of 5 stars. in 2009, it introduced a plugin for PacketShaper to throttle applications like Spotify. A review of the PacketShaper 12000 in IT Pro gave it four out of five stars. The review said that "you won't find superior WAN traffic management anywhere else," but "the hardware platform could be more up to date considering the price." Elastica's technology was incorporated into Blue Coat products in 2014, with its Audit subscription service being merged into the Blue Coat Appfeed in the ProxySG gateways.
In March 2015, Blue Coat integrated technologies from its acquisitions of Norman Shark and Solera Networks to create a cloud-based product family called the Global Intelligence Network.
Use by repressive regimes
Blue Coat devices are what's known as a "dual-use" technology, because they can be used to defend corporate networks, or by governments to censor and monitor the public's internet traffic. The appliances can see some types of encrypted traffic, block websites, or record when people visit them.
In October 2011 the U.S. government was looking into claims made by Telecomix that the Syrian government is using Blue Coat's products in order to censor the internet. The hacktivist group released 54 GB of log data alleged to have been taken from seven Blue Coat web gateway appliances that depict search terms, including "Israel" and "proxy", that were blocked in the country using the appliances. Blue Coat later acknowledged their systems were being used within Syria, but assert the equipment was sold to intermediaries in Dubai, which they believed was destined for an Iraqi governmental agency, not the Syrian regime.
Despite the systems consistently sending "heartbeat" pings directly back to Blue Coat, they claim to not monitor their logs to identify from which country an appliance is communicating. Blue Coat further announced they would halt providing updates, support and other services for systems operating within Syria. In April 2013, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) announced a $2.8 million civil settlement with the Dubai reseller Computerlinks FZCO for violations of the Export Administration Regulations (EAR) related to the transfer to Syria of Blue Coat products.
According to The Wall Street Journal, Blue Coat's devices are also used to block the public from viewing certain websites in Bahrain, Qatar, and U.A.E., among others. By 2013, Citizen Lab had published three reports regarding BlueCoat devices being found in countries known for using technology to violate human rights. It identified 61 countries using Blue Coat devices, including those known for censoring and surveilling their citizens' internet activity, such as China, Egypt, Russia and Venezuela. According to The Washington Post, "it remains unclear exactly how the technologies are being used, but experts say the tools could empower repressive governments to spy on opponents."
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- 25 percent of the overall market for caching and 35 percent of the caching appliance market specifically
- The new name was intended to evoke the image of a police officer or guard.
- Assets from NetApp
- The Websense partnership was later at least partially dismantled and the two vendors were "slinging mud at each other" in the VAR community.