IBM Buyout Will Put Israel on Data Security Map, Says Trusteer CEO

IBM's acquisition of high-tech startup Trusteer marks an unusually successful exit, with the deal said to be worth $800 million.

IBM's acquisition of high-tech company Trusteer will help put Israel on the global data security, Trusteer founder and CEO Mickey Boodaei told TheMarker after the buyout announcement.

The deal, announced Thursday, is an unusually successful exit – IBM is believed to be paying $800 million for the company, which develops software to thwart fraud in online bank transactions. This is 80 times the investment made in Trusteer, which was started with only $10 million.

Trusteer will be IBM’s 10th company purchase in Israel. IBM also acquired two American companies and a Swiss company with development centers in Israel. Trusteer is also IBM's most expensive Israeli acquisition. XIV, purchased in 2008 for $300 million to $350 million, is a far second.

Following the acquisition, IBM plans to create a lab in Israel where former Trusteer employees will work alongside current IBM researchers and software developers on data security solutions for applications and mobile platforms.

Boodaei can consider himself responsible for the success.

"We imagined it two years ago, and now it's happened," he told TheMarker after the sale was announced. "The goal is to build a much larger team than we have now based on Trusteer's infrastructure. There's a lot of work here. We're here for the long haul, and we intend to develop products in new fields."

Boodaei founded Trusteer in 2006 after four years at Imperva, which he founded with Shlomo Kramer and Amichai Shulman.

"In founding Trusteer, I pulled together a team with strong skills in data security and programming," Boodaei said.

The team examined advanced malware and how it affected large organizations. "The moment we understood the problem and the limitations of existing solutions, we built a unique system to identify attacks," he said.

"We concluded that one of the technology's main applications is in preventing fraud carried out by taking over the end-user's computer and carrying out online bank transactions – a kind of fraud that was causing hundreds of millions of dollars in losses to banks around the world at the time."

Trusteer's software to prevent this kind of fraud is used by more than 400 banks and financial institutions, including RBS, Merrill Lynch and HSBC.

"We built our name based on our ability to support large financial organizations that have millions if not tens of millions of fraud attempts a year," he said. "We helped them minimize online fraud."

Trusteer later expanded into helping other large organizations prevent infiltration via portals used by end users and employees. "We entered this field in the past two years, and it's growing at a very quick pace," Boodaei said.

The development center based on Trusteer's team will be part of the new programming division IBM founded last year. Trusteer first made contact with IBM a year and a half ago with the goal of working jointly with customers.

"We started getting to know the products and the abilities on each side, and we saw there was a connection and a joint vision," said Boodaei.

Each IBM division has several global research labs. As part of the process of setting up a data security division, IBM looked for places to set up these labs.

"We were enchanted by the thought that IBM would set up this research lab in Israel of all places," said Boodaei. "IBM identified the potential and the asset in Israel, and understood the advantages of a large body that would research and develop products here. They saw the opportunity to turn Trusteer into a building block of this new division."

IBM also operates a data security lab in the United States. It focuses on securing central systems, while the Israeli center will focus on targeted cyber attacks and data security for mobile devices.

"The most innovative fields will be handled in Israel," Boodaei said.

IBM's first goal will be incorporating Trusteer's products into its own products. Many Trusteer customers are also IBM customers, Boodaei noted. Over the longer term, IBM will seek to expand the development center's responsibilities, he said.

"Trusteer's acquisition could be a significant contribution toward placing Israel on the global data security map," said Boodaei. "I believe that for this to happen, we need companies like IBM to come and set up their R&D centers here.

"These things are built over time. R&D centers help Israel's local data security industry and startups. Even today we lack developers and people who understand data security. Part of the role of a development center like IBM's is to train people and expand the market," Boodaei said.

Ofer Vaknin
Bloomberg