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CyberGuard buys TradeWave

Investors yawn at news that firewall vendor CyberGuard has acquired digital ID firm TradeWave to round out its security offerings.

Moving aggressively to become a top-tier security provider for Internet commerce, CyberGuard (CYBG) has acquired the assets of Austin, Texas-based TradeWave from TradeWave's parent, SunRiver (SRVC).

Investors yawned at today's announcement. At midday, Sun River traded unchanged at 1-1/32, while CyberGuard had fallen slightly.

CyberGuard, a firewall vendor primarily focused on the financial services industry, said the acquisition will round out its security offerings as it moves to become a one-stop supplier of complete security services and products for e-commerce. It is specifically targeting financial services as well as utilities and health care.

TradeWave, which is active in those sectors, operates an e-commerce certificate authority (CA) that issues digital IDs. Its best-known offering is a wholesale electric power trading system for power utilities that goes by the name Open Access Same-time Information System (OASIS).

CyberGuard CEO Robert Carberry said his company will pay $300,000 to $400,000 cash, plus a 3 percent royalty on TradeWave's continuing revenues from the utilities project. Sun River, which bought TradeWave about two years ago, makes dumb terminals and network computers (NCs) as its core business.

Carberry said TradeWave booked $2.1 million in revenues last year, making the acquisition a bargain for CyberGuard, which expects to report about $15 million in revenue for the year ending June 30. Projected revenues for the CyberGuard's next fiscal year are around $29 million.

There's a new management team at Sun River, which is in the process of changing its name to Boundless--the name of its NC operating unit. The team decided last year to close TradeWave and focus on its terminal manufacturing business. The company wrote off a $9.7 million loss for costs of closing TradeWave.

"Basically TradeWave was a cash drain on the us," said a Sun River spokesman. "Trade Wave was losing money, putting more money into the product, and it didn't fit into our core business. If it had not been sold, we would have discontinued it anyway."

Analyst see financial services as a promising sector for e-commerce over the Net--if security concerns are addressed. Security-conscious banks already send billions of dollars in inter-bank transfers over private networks daily. Many finance companies are rushing to add consumer services like home banking or stock trading over the Internet.

CyberGuard markets its own CyberGuard firewall, a secure operating system, and network software as well as third-party products for virtual private networks (VPN). The TradeWave acquisition adds "certificate authority" technology, products and services, and CAs are key elements in virtually any e-commerce application and on many intranets.

OASIS, TradeWave's most important customer, has endorsed the CyberGuard acquisition.

Austin, Texas-based TradeWave was founded in 1991 as Enterprise Integration Network (EINet), part of the Microelectronics and Computer Technology Corporation, a high-tech research consortium.