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Security Dynamics to buy RSA Data

In an effort to become a major player in the future of electronic commerce, Security Dynamics today agreed to pay about $200 million to purchase encryption software leader RSA Data Security.

    In an effort to become a major player in the future of electronic commerce, Security Dynamics today agreed to pay about $200 million to purchase encryption software leader RSA Data Security.

    RSA Data Security is considered the leading developer of public key encryption software for protecting information sent across the Internet and has licensed 25 million copies of its encryption technology. Security Dynamics develops hardware and software security products that are used to protect passwords from hackers.

    Security Dynamics' flagship is the patented SecurID Card, a credit-card-sized device that users can plug in to their PCs to generate a new password every time they log on. This way, even if a password is stolen, it is so quickly replaced that it has no value.

    The merger will combine RSA's public key and encryption technology with Security's identification and authentication technology and is expected to speed up the process of electronic commerce.

    "It's a really nice fit. They are essentially two leaders in two emerging markets which strengthens both sides," said John Pescatore, research director for information security at International Data Corporation. "Both companies are very critical to the future of electronic commerce."

    Expected to be completed in June, the merger will also reduce the cost of shopping online, Pescatore said. "Merchants will feel safer by using technology from both companies and the prices will be lowered. Online shopping costs more than shopping in stores because of security problems and potential fraud, but strong authentication will lower rates and vendors will most likely pass on the savings," he said.

    Although it is the smaller company, RSA has already gone far to establishing an encryption standard. Companies Microsoft, Netscape Communications, AT&T, Sun Microsystems, MasterCard International, and Visa International all use RSA encryption technology.

    RSA had revenue of about $11.6 million in 1995. Security Dynamics turned $12.2 million in sales during this year's first quarter alone.

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