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Efficient buys private Net security firm for $905M

Efficient Networks Inc. (Nasdaq: EFNT) said Tuesday it will acquire privately held NetScreen Technologies in a stock swap valued at $905 million.

The Dallas-based Efficient Networks, which provides digital subscriber line equipment, said NetScreen will add Internet security products to its arsenal. NetScreen makes products that offer firewall and Virtual Private Network (VPN) features.

Efficient said it will issue 5.28 million shares of its common stock for all of NetScreen's stock and options. Based on Efficient's closing price of 172 Monday, the deal is valued at $905 million. NetScreen shareholders and employees will own about 8 percent of Efficient.

The companies said NetScreen had an annual revenue run rate of $22 million based on the expectations for the quarter ending March 31. NetScreen currently has 125 employees. There are no layoffs planned.

The NetScreen acquisition will boost revenue, but Efficient was mum on earnings impact. Efficient said the acquisition, which is expected to close in the quarter ending June 30, will be accounted for as a purchase.

Robert Thomas, chief executive officer of NetScreen, will oversee the integration of the two companies, and become president and chief operating officer of Efficient.

Efficient primarily competes with 3Com (Nasdaq: COMS), Alcatel (Nasdaq: ALA) and Cisco Systems (Nasdaq: CSCO). Cabletron owns about 25 percent of Efficient; Texas Instruments (NYSE: TXN) and Siemens own 12 percent and 10 percent, respectively.

In Efficient's December quarter, the company reported an operating loss of 14 cents a share. With charges, Efficient lost 47 cents a share. Revenue was strong in the December quarter at $26.4 million, compared to $12.2 million in the September quarter.

Efficient Networks recently completed the purchase of FlowPoint Corp. from Cabletron.