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WithSecure, the new brand in cyber security

F-Secure is sharpening its focus on corporate customers with the launch of a new cyber security brand and plans to demerge the company into separate consumer and B2B businesses

There’s a new name in cybersecurity, WithSecure, following the decision by F-Secure to demerge the consumer and B2B parts of its business and create two separate companies, F-Secure for consumers and WithSecure for business customers.

Subject to approval at an extra shareholder’s general meeting next month (May), described by F-Secure CEO Juhani Hintikka as a formality, F-Secure and WithSecure will operate as two separate listed entities from July 1.

Hintikka told Technology Reseller that the demerger would bring increased focus to the new companies; provide greater clarity over their respective propositions; help to improve their competitiveness, execution and time to market; and potentially help with funding.

“For the financial markets, this gives us the opportunity to tell a clear equity story that is a little bit different on both sides… because the dynamics in the corporate/ B2B side are completely different to those on the consumer side. The market is growing at a faster pace on the B2B side and there’s a lot of M&A action because of that.”

He added: “We believe the fact that we are two almost single-purpose companies will be very attractive for the markets. We’re not alone in this. If we look at the overall cybersecurity market, many other companies have taken the view that they want to have a similar type of focus and that has led to some consolidation of the consumer space, where there have been a couple of high-profile acquisitions in the past 12 months.”

Although a demerger is essentially a technical process, where the company is divided and shares allocated to existing shareholders, Hintikka said that the company has been considering an equity raise as well.

“If we do the equity raise before the split, then obviously we do it as the current company, but it would be done for the B2B business. If we look at the financial profile of the two entities, there is a highly profitable business at a very good mature state on the consumer side, where we are growing with the market at about 5%, but with EBITDA of over 40% and strong cash flows. On the B2B side, we’re coming off an investment cycle and we’re still negative in terms of profitability, but we foresee high growth.”

In fact, F-Secure has already announced that it wants to double the size of WithSecure by the end of 2025 and get into profitability by the end of 2023.

“We’ve made a big investment in our OneDR detection and response platform, which is used in our EDR (endpoint detection and response) business and
in our MDR (managed detection and response) business. Logically, when
you grow the top line and you don’t proportionally grow your fixed costs,
then at some point you make more money than you spend and that’s when you reach profitability.”

Channel support

Hintikka doesn’t expect the demerger to have any material impact on channel partners because the two sides of the business already have separate go-to-market strategies. After the de- merger F-Secure will maintain existing relationships with more than 130 telecoms operators and 40 other service providers and WithSecure will continue to go to market through its 7,000+ reseller partners (and direct with some clients).

Nonetheless, Hintikka says feedback from partners on the B2B side has
been positive, because while the B2B business is larger, boosted by a couple
of acquisitions in 2018, with revenues of circa $130 million versus $100 million on the consumer side, the F-Secure brand has strong consumer associations.

“Many B2B partners say that when they approach the end customer and start talking about F-Secure, they have to spend the first 15 minutes explaining what F-Secure is and what it is not, because F-Secure is perceived as more of a consumer brand than a B2B brand. When you Google it, the first three pages are all about consumer. Partners are encouraged because this change should make it easier to communicate what the brand stands for, which is really about good partnerships, the desire and need to co-secure things, to do things together.”

Hintikka is confident the establishment of WithSecure will maintain the momentum generated by recent B2B product launches and the on-going migration of B2B customers from on-premises to the cloud, with cloud solutions in its portfolio already accounting for almost half of B2B revenues (a little over $60 million out of $130 million) and growing at 34% year- on-year.

“We introduced the Elements unified cloud-based cyber security platform at the end of last May to very good reception and growth. We introduced our Cloud Protection for Salesforce offering as well, and we’ll be growing that aggressively. And we’ll be rolling out MDR as a managed service, based on the OneDR platform, as well.  So in practice we have a growth portfolio with three key components on the B2B side. We’ve been very encouraged by the momentum we’ve enjoyed since December and plan to take that forward.”

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