James Ashton
, The Sunday Times August 10, 2008

The e-mail security firm MessageLabs, which scans 3 billion messages a day for spam and computer viruses, broke into the black last year and has appointed investment banks to consider a flotation.

Founded nine years ago by two Gloucestershire brothers, Ben and Jos White, the company could be valued at up to £400m.

In the year to June, the unaudited numbers at MessageLabs show it swung to a £5.5m operating profit from a £5m operating loss last time. Sales rose 22% to £72.5m.

The company has expanded to screen companies’ outgoing e-mails to prevent the loss of sensitive data, as well as storing e-mail records for clients.

Stephen Chandler, the finance director, said: “We had a stronger second half than first and July was a record month for us. Security is really a must-have. At the moment, we are not seeing any signs of a downturn.”

MessageLabs had a 5.4% share of the £1.3 billion world-wide messaging security market in 2007, ahead of Microsoft and Google, according to IDC data. The market is growing at 23% a year and MessageLabs leads the way in hosting e-mail security for companies remotely over the internet, the fastest-growing segment.

The firm has appointed JP Morgan Cazenove and Citi-group to consider its future.

“Stock-market conditions are looking pretty choppy at the moment, but it is fair to say that an IPO is one potential outcome that we are considering,” said Chandler.

Most rivals of MessageLabs have been bought out by IT giants eager to tap into a fertile area for growth as the volume of unsolicited bulk messages, or spam, multiplies. It reached 40 billion last year, exceeding legitimate e-mails for the first time.

With this in mind, Google acquired Postini for £325m last year, after internet-equipment maker Cisco bought IronPort.

The stock market has generally been closed to information-technology flotations. Although Telecity, the data-hosting company, made a successful debut last October, SmartStream, whose technology automates the back office of banks’ trading floors, pulled its plans and was sold to the Dubai International Financial Centre shortly after.

Last week, Rackspace, an American web-hosting business, raised £100m in a Wall Street debut, but its shares were priced at the bottom of the range and slid almost 20% on their first day’s trading.

MessageLabs does not need to raise cash for expansion but its founders may be keen to sell down their holding.

The Whites, together with partner Rory Sweet and existing management, still own more than 50% of the company. They stepped back from day-to-day management two years ago when Adrian Chamberlain, a former director at Cable & Wireless, became chief executive.

The remainder of the company is in the hands of RIT Capital Partners, the families of Lords Rothschild and Wein-stock, as well as US backer Catalyst Investors.

MessageLabs traces its roots to RB Resources Network, a company that was founded in 1993 to distribute Cisco equipment. That was sold off to Datatec before MessageLabs was established. Another business, Star Internet, an internet service provider, was split off from the group more recently.

MessageLabs has 530 staff spread over 11 countries and serves 18,000 clients.