Raytheon targeting computer weaknesses with $1.9 billion cybersecurity deal

Digital threats push Websense purchase

Raytheon CEO Thomas Kennedy (above) said the new company will be managed independently so it won’t be overwhelmed by the defense firm’s bureaucratic style.
Raytheon Co.
Raytheon CEO Thomas Kennedy (above) said the new company will be managed independently so it won’t be overwhelmed by the defense firm’s bureaucratic style.

With its $1.9 billion deal to acquire network security company Websense, Waltham-based defense contractor Raytheon Corp. hopes to prepare its customers for a world in which any electronic device or network connection could become the gateway for a devastating digital attack.

“Today’s enterprises are more vulnerable than ever due to the proliferation of cloud computing, mobile devices, and the Internet of things,” said David Wajsgras, president of Raytheon’s intelligence, information, and services business, during a conference call Monday on the Websense acquisition. “Our goal is to provide an integrated defense.”

Raytheon is famed for the Tomahawk, Patriot, and Sidewinder guided- missile systems and is a major maker of radar and electronic warfare gear. But over the past decade, Raytheon has done more than a dozen cybersecurity-related deals, including the $420 million acquisition in November of Blackbird Technologies, a surveillance and cybersecurity company.


Up to now, Raytheon’s security practice has mainly served the company’s traditional customers in the military and aerospace sectors, said Monolina Sen, a senior cybersecurity analyst for ABI Research in London.

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The Websense acquisition, Sen said, “will help it to expand its reach in other sectors such as finance, retail, education, health care, and so on.”

Websense makes products that can analyze data flowing in and out of corporate networks, to identify a variety of threats, including malicious e-mails, corrupted Internet sites, and infected computers inside the company’s firewall.

For instance, Websense can test an attached software file by running it inside a “sandbox” that isolates it from the rest of the company network. It has a constantly updated database of known malicious Internet addresses; access to these addresses can be blocked automatically.

And Websense makes tools that can prevent infected computers from transmitting sensitive company data.


Peter Firstbrook, a vice president at research firm Gartner Inc., said Raytheon is preparing for a new torrent of digital threats that will arise when our phones, cars, household appliances, factory gear, and nearly everything else will be connected through data networks. In this “Internet of things,” people will be able to control and manage all these devices from anywhere in the world. But a security flaw in a single device could give criminals or spies easy access to sensitive data, or let them vandalize critical business or government computer systems.

Firstbrook said that when billions of devices join the Internet of things, it will be extremely difficult to install security on one device at a time. So Raytheon will use its Websense purchase to develop systems that can scan entire networks for malicious activity. “If you’re protected in the network,” Firstbrook said, “you have a better chance of detecting this stuff.”

Raytheon will pay $1.3 billion in cash to acquire an 80 percent stake in Austin, Texas-based Websense from its current owner, the private-equity firm Vista Equity Partners LLC.

In addition, Raytheon will lend $600 million to Websense and combine the company with Raytheon’s existing cybersecurity business, valued at $400 million.

The deal is expected to close in the second quarter of the year, and the resulting security company will be renamed at that time, according to a Raytheon spokesman. The deal will not affect Raytheon’s operations in Massachusetts, and no job losses or relocations are expected.


John McCormack, Websense’s chief executive, will hold the same title for the newly created company.

Raytheon chief executive Thomas Kennedy said the new company will be managed independently, to ensure it is not overwhelmed by the bureaucratic style of a major defense contractor.

“It’s not going to get smothered under the mother Raytheon defense ship,” Kennedy said.

Raytheon and Websense face increasing competition from other cybersecurity firms. Firstbrook, the Gartner analyst, said Websense faces a tough fight against its biggest rival, Blue Coat Systems Inc., which was acquired last month by Bain Capital LLC of Boston for $2.4 billion. Firstbrook said that Blue Coat is popular with governments around the world, while Websense mainly serves small and medium-size companies.

But in the face of major cybersecurity breaches, like the 2013 credit card theft at Target Corp. or last year’s breach at Sony Corp., Raytheon officials expect to ride a wave of strong demand for data security upgrades. Wajsgras said the global market for information security products and services stands at $70 billion and that sales will grow 8 percent per year through 2018.

Raytheon’s shares closed down 23 cents at $107.49 on the New York Stock Exchange.