Sendmail Pushes the Security Envelope
May 22, 2009
Emeryville company’s app scans worker emails
By Patrick Hoge
Sendmail Inc. is getting the message.
Founded in 1998 by Eric Allman, Emeryville-based Sendmail Inc. was, until recently, a small email service company that missed the opportunity to cash in on the spam and virus protection craze.
But in 2006, the company brought in security industry veteran Don Massaro to be CEO. Allman, the author of a pathbreaking and widespread open source software long used by many large companies for delivering email, continued as the company’s chief scientist.
At Massaro’s urging, Sendmail then developed a message-processing appliance for handling outgoing as well as incoming email to prevent a theft or leakage of company information, or a violation of data handling policies by employees.
Almost instantly, product revenue jumped to $32 million in 2008 from $23 million in 2007 and $15 million in 2006, and the trend has continued into this year. The company has 400 customers, including 10 new Fortune 500 customers added in 2008.
Sendmail, which has been cash flow positive for the last two years, had a strong first quarter, with an annual run rate of $40 million. Due to the recession, however, Massaro is cautiously predicting growth of 30 percent for the whole year.
The company has 120 employees, including 50 in Emeryville, 50 in sales offices around the United States, Europe and Japan and 20 doing development work in Goa, India.
Sendmail has no plans to hire this year but is anticipating significant hiring in 2010. Massaro said he would like to expand his sales and marketing team, but the credit crisis has made capital too hard to get. The company is talking with venture capitalists, he said.
“In spite of the economy, we’ve been on quite a roll these last two and a half years,” Massaro said. “We have been doing really, really well.”
Sendmail now has a blue chip list of public and private industry clients for its various products, including Credit Suisse, JP Morgan Chase, Wells Fargo, Charles Schwab, Gap and Oracle.
Demand for updated email systems has been particularly strong among financial services companies, driven in part by both regulatory requirements and mergers and acquisitions that require integration of vast databases, Massaro said.
The upswing in business has Sendmail on a trajectory that should have been its “birthright,” given that Allman wrote open source email transfer software that has become ubiquitous while a graduate student at the University of California, Berkeley, in the 1980s, said Gartner analyst Matthew Cain. For years, Allman tended to his creation through a nonprofit open source foundation, Sendmail.org, before deciding in the late 1990s to set up a for-profit operation as well.
Today, open source and commercial versions of Sendmail technology are found on over 35 percent of all Internet servers, and deliver over 65 percent of the email messages sent worldwide, the company says.
“If any company was well positioned to move into that space as demand started ramping up, it would have been Sendmail,” Cain said. But the company was late to market with anti-spam, anti-virus and encryption products, he said.
Before Sendmail, Massaro was CEO and co-founder at Reconnex Corp., a data security company that was acquired by McAfee. Previously, Massaro was also a founder and CEO of Metaphor Computer Systems, which was acquired by IBM in 1991.
Bill Pray, an analyst with Burton Group in Utah, said the email processing industry is dominated by IBM and Microsoft, and is getting more competitive as they and other tech giants, including Google, develop collaborative platforms that include email, instant messaging, video conferencing and other tools.
Cisco, for example, which already owned WebEx for video communications and Ironport for “email hygiene,” bought Postpath, an email delivery company, at the end of August, and in November bought Jabber, an instant messaging provider.