(FROM THE WALL STREET JOURNAL 4/20/15) 
   By Doug Cameron 

Raytheon Co. is betting it can leverage the cybersecurity skills it honed for the U.S. military and intelligence agencies to sell to banks and retailers, investing almost $1.7 billion to establish a stand-alone business in an area where its defense peers have struggled to make money.

The company plans to announce Monday that it bought control of Websense Inc. from private-equity firm Vista Partners LLC. Austin, Texas-based Websense, which has 21,000 data-security clients, will form the core of a new cyber joint venture with forecast sales of $500 million this year and margins of around 20%.

Raytheon Chief Executive Tom Kennedy said the threat of cyberattacks such as the one suffered last year by Target Corp. is increasing as cloud computing and mobile services make companies more vulnerable to costly electronic intrusions by state-sponsored hackers, terrorists, organized crime or insiders.

"CEOs are shaking in their boots," said Mr. Kennedy, who took the helm of the fourth-largest U.S. defense contractor by sales in March of last year.

Raytheon is paying the equivalent of more than four to five times Websense's annual sales, a pricey multiple for the defense industry. The deal is the largest acquisition in a decade by one of the nation's five prime defense contractors. Those companies collectively have done dozens of deals aimed at parlaying their Pentagon experience into commercial work, with mixed results.

Defense companies have found it tough to convert salespeople who are used to dealing with the Defense Department to selling cyber products to other clients, while the Pentagon has been reluctant to allow contractors to transfer technology to their nonmilitary customers.

Raytheon executives said the Websense deal addressed both issues. Websense has an experienced commercial sales staff, while Raytheon has deals with the Pentagon to use some intellectual property in the commercial sector.

Raytheon has made the defense industry's most concerted push into cyber, with 14 acquisitions since 2007, including the $420 million purchase of Blackbird Technologies in November.

With dozens of commercial cybersecurity firms springing up, defense companies have found it tough to gain traction. General Dynamics Corp. last week sold a commercial cyber firm it acquired three years ago, and plans to focus on government work. Boeing Co. made a similar move in January, but Lockheed Martin Corp. is continuing to target commercial cyber business.

Websense "would clearly take Raytheon well into the commercial cybersecurity space, which we believe would involve significant risk," said Sanford C. Bernstein & Co. analysts in a recent report on the sector.

Websense CEO John McCormack, who will head the new Raytheon venture, said the focus of commercial cyber has shifted from deterring threats to limiting their damage. "The days are gone when you can prevent intrusion," he said in an interview.

He said Websense has outperformed a global commercial cyber market, growing about 8% a year, with a top 10 market position in monitoring Web gateways and data-loss protection.

Raytheon, which is based in Waltham, Mass., predicted the joint venture would deliver high-single-digit revenue growth next year and mid-double-digit growth in 2017, and would be profitable from day one. Raytheon will have an 80% stake in the new cyber venture, with Vista Partners holding 20%.

Raytheon is investing $965 million in cash, providing a $600 million loan and injecting $400 million of existing cyber assets into the as-yet unnamed venture. Vista Partners, which took Websense private for $890 million in 2013, will invest $335 million in the venture.

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