Corero to inject sale proceeds into next-gen products

DDoS-mitigation vendor flogs education software arm to Civica for £13m

Security vendor Corero will inject the proceeds raised from the sale of its non-core education software arm into developing "next-generation" DDoS-mitigation products.

The AIM-listed vendor this morning announced that it is planning to sell its Corero Business Systems (CBS) arm to Civica for £13m – about eight times the division's earnings.

It would represent software and service player Civica's first acquisition since it was bought out by OMERS Private Equity in May.

The divestment will mean Corero focuses solely on network security, a market it only entered in 2011 when it acquired intrusion prevention outfit TopLayer.

Corero, which recently reshuffled its top management, said it would plough the proceeds of the sale into development and rollout of its next-generation products.

"The ‘next-generation' offering is intended for deployment in cloud infrastructure, virtual environments, and larger-scale networks," Corero said in an investor announcement this morning.

"The board believes that the offering will enable partnerships to be struck with other original equipment manufacturers (OEMs), provide access to new markets and potentially increase the company's share of network security budgets."

Corero sank to an EBITDA loss of $5m (£3.3m) on sales of just $1.4m last year and its financial performance to date was dubbed "something of a disappointment" by analyst Megabuyte.

Nonetheless, Megabuyte said Corero's decision to sell off its CBS – which supplies finance and business management software to the education and commercial markets – was an "unsurprising move".

"While CBS is clearly non-core, it has been providing very useful cashflow to the group as the network security business continues to consume a significant amount of cash," Megabuyte said.

"So, while this divestment will certainly help the balance sheet in the short term, it will also increase the company's overall cash burn significantly."