By acquiring the Munich-based IT security specialist Integralis AG, the Japanese telco giant NTT (Nippon Telephone & Telegraph) plans to become a major player in the world-wide market for managed security and identity management solutions. Integralis (511 employees, €167 million Turnover) will be integrated as a separate division within NTT’s Communications subsidiary (13,000 employees, €10 billion turnover).

On Tuesday, NTT offered the Integralis shareholders €6.75 per share. Integralis’ shares had been trading for around €5, up from a low of €2.14 in February. This represents a windfall for stock owners of about 70 percent over the past three months. However, at the height of the Internet frenzy back in 2001 the share price climbed to a dizzying €165.

Integralis has recently been following an aggressive international expansion strategy, acquiring or founding companies in North America, the Near East and Asia and focusing extensively on Managed Security and Identity as a Service concepts. Simultaneously Integralis opened a string of Security Operation Centers (SOC) around the world in order to provide “follow the sun” support for its customers. NTT, which operates a single SOC in Japan, intends to begin offering its own clients 24-hour service as soon as the merger is confirmed by German anti-trust authorities. At present, NTT has no Managed Security offerings of its own, choosing instead to cooperate with IBM’s ISS division.

I called Georg Magg, the CEO of Integralis, shortly after the deal was announced, and he confirmed that his company had been actively seeking an aqcquisition partner over the past few months. “We’re too small to play at the big table”, he said. As the security arm of NTT, he insists, it will be much easier to bid successfully for major international projects.

Integralis recently entered the Identity & Access Management market with a series of Managed Services offerings, mostly focused on providing authentication solutions ranging from remote monitoring to remote operation or complete hosting. Though most at Integralis would beg to disagree, the truth is that Identity Management as hitherto addressed by the company remains largely a sideshow to their IT Security offerings – a rather short-sighted view in KCP’s opinion.

We are curious to see how the added financial elbow room provided by the NTT acquisition will effect Integralis‘ ability to expand its IAM options towards true “identity as a service”solutions, something that would appear well within the company’s capabilities. However, Tokyo will be calling the tune now, and it remains to be seen what, if any, IAM strategy the new owners will pursue.

Apparently NTT was only one of two or so dozen companies interested in acquiring Integralis. From a strategic standpoint KCP feels that a different choice might have been preferable – for instance IBM where Integralis would have greatly complemented the existing ISS portfolio. Even continuing on alone might have been a viable option. However it seems that the major stakeholders, especially a few large investment funds, decided to end the rollercoaster ride of the Integralis stock and cash in their chips – disappointing, maybe, but understandable. We doubt that a medium-sized Anglo-German specialist with a distinctly central European viewpoint will be easy to integrate into an Asian corporate giant. While NTT has had some major wins in Europe (most notably Deutsche Lufthansa), the company has lagged behind its competitors in most European markets. Much will depend on whether NTT can successfully integrate the Managed Security solutions provided by Integralis into its existing services portfolio, and whether they will keep the dedicated team working for Integralis at a sufficiently loose rein. Given the tendency of some Asian conglomerates to micro-manage Western acquisitions, this is a serious worry. The real value of Integralis lies in its highly-qualified and hard-to-replace professionals, any of which would be a rare catch for the competition.