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Check Point shops for networkers

The top-selling firewall company is looking at network management acquisitions, making it the first security player to move into that space.

With a merger and acquisition frenzy under way among Internet security firms, the top-selling firewall firm, Check Point (CHKPF), is shopping--but not for security companies.

Instead, Check Point, the best-known security firm on both the Net and Wall Street, is looking at network management acquisitions, according to sources close to the company.

Although the Internet security and networking markets are converging, buying a network management firm would make Check Point the first security player to expand from its core market into network management software. Networking firms have been flooding into Internet security.

"We don't feel the need to buy another security company. We have our security capabilities pretty much down pat," said Check Point spokeswoman Emily Cohen. "We're not evaluating other security companies for acquisition."

Check Point has been saying for months that it frequently talks to potential acquisition candidates, but many observers have assumed it is looking for new Net security capabilities.

They also have wondered why Check Point has been standing still while others acquire.

"They haven't pulled the trigger yet," said Ted Julian, industry analyst at Forrester Research. "Any time a company goes public in the high-tech space, Wall Street typically expects an acquisition to happen. It's par for the course."

At the same time, Check Point, with a stock market value of $1.5 billion, is too large to be acquired by any but the largest technology firms, a Hewlett-Packard or IBM, for example.

Cohen declined to say where Check Point's intentions lie, but the company has put major emphasis on managing large enterprise networks, not just for security purposes but also, with its FloodGate-1 product, for bandwidth management. Bandwidth management allows corporate network administrators to prioritize which applications (Web browsing, file transfer protocol, multimedia) or individuals get first claim on available network capacity.

Check Point said last month it will merge FloodGate-1 with its flagship FireWall-1 by year's end.

Check Point has long emphasized "policy-based management"; its capabilities to manage large networks from a single console based on rules or policies. That applies both to its own software and to software or hardware from the 100-plus companies in its Open Platform for Secure Enterprise Connectivity (OPSEC) alliance, including HP, IBM, 3Com, Security Dynamics, Bay Networks, and IBM's Tivoli Systems.

"This is not a loosely coupled marketing alliance. It's tight integration of our products and our partners' products," Cohen noted, because OPSEC members are tested for integrating with Check Point technology. The company is banking on OPSEC partners to fill any security holes in its offerings.

But moving into network management, while a logical extension of Check Point's current product lines, would pit it against new, larger rivals. Network Associates, for example, has been assembling by acquisition a comparable set of capabilities. Also huge in network management are HP with Open View, IBM's Tivoli TME 10, and Computer Associates.

Goldman Sachs equity analyst Rakesh Sood, who follows Check Point, contrasts its strategy with that of Network Associates.

"The battle that is brewing is integrated suites vs. best-of-breed," said Sood. "Integrated suites have a lot of products in multiple areas, perhaps with an aggressive price point. The other way is to offer best-of-breed software in each area, provided that they have a framework in which those products can be made to fit.

"In extending their offerings, people can either develop things internally or acquire them. Or they can utilize the technology that they have into other application areas," Sood added.

Check Point's patented "stateful inspection" technology, the basis for both its security and bandwidth management software, could easily be extended into network management, Sood said.

He named Network Associates as a vendor pursuing the integrated suite strategy: "Their products are now largely bundled, but they will do the integration over time. They have the opportunity and associated challenge to scale." Also in Sood's suite set: Security firm Axent Technologies, which bought firewall firm Raptor last year.

In the best-of-breed category, Sood named Security Dynamics, which yesterday added Intrusion Detection to its stable, and Internet Security Systems, an intrusion detection firm that went public this week.

"Both approaches have their pace in different segments with different kinds of customers," Sood added, saying best-of-breed is more likely to appeal to the Fortune 2000 market, while mid-sized and smaller firms may buy the integrated suite story.