Microsoft finalizes Adallom deal at last

It’s official: Microsoft is buying Adallom, a cloud security provider, nearly two months after news of the deal was first reported by Israeli news outlets.

Terms were not disclosed and are in dispute. One source close to the deal said that the price, initially reported to be $320 million cash, is actually $250 million, but could grow to $320 million if prescribed targets are hit. Microsoft, the source said, wants to be assured that Adallom can be a $10-million-a-year business. That characterization, however, was countered by another source, who said $250 million is the purchase price all-in.

A Microsoft spokesperson would not comment on terms of the acquisition.

Adallom, according to a blog post announcing the purchase, “delivers a cloud security broker to give customers visibility and control over application access as well as their critical company data stored across cloud services.”

Three-year-old Adallom says it protects not just data sitting inside a company’s own server rooms, but also data that is created and resides in outside third-party software services, the so-called software-as-service vendors like Salesforce (CRM) and Box (BOX).

The company’s technology will be applied across various Microsoft properties (MSFT) including Microsoft Retail Management System, Azure Active Directory, and Azure itself, Microsoft said in a blog post. Adallom said it will continue to support non-Microsoft applications as well.

Cloud security will be a burgeoning market as more businesses turn to outside software-as-a-service vendors for key applications for everything from word processing and email to human resources and expense report management. Forrester Research (FORR) estimates that companies are now spending $282 million on cloud security services annually, but expects that amount to skyrocket to $2 billion by 2020.

That’s why it’s been boom times for mergers and acquisitions in this market with Cisco (CSCO) acquiring OpenDNS for $635 million in cash, Hewlett-Packard (HPQ) ponying up for Voltage Security, and other deals earlier this year.

Note: This story was updated at 10:00 a.m. EST with additional information on how the deal was structured and again at 1:37 p.m. EST with details on the disputed deal price.

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