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NetScreen locks up secure-network deal

The security device maker announces an agreement to buy Neoteris, a leader in the fast-growing market for virtual private networks based on secure sockets layer technology.

Security device maker NetScreen Technologies announced on Monday that it signed an agreement to buy Neoteris, a leader in the fast-growing market for virtual private networks based on secure sockets layer technology.

The deal--for $245 million in stock and $20 million in cash, with a $30 million bonus if the Neoteris team meets certain sales targets--bumps NetScreen toward the front of the security market for virtual private network (VPN) devices that use encrypted communications technology included in almost every Web browser.

The company now has products addressing both of the major secure networking technologies: those based on secure sockets layer (SSL) and those based on the Internet Protocol Security (IPSec) standard, said John Pescatore, vice president for Internet security at business research group Gartner.

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"It's a pretty steep price, but a really good move," he said.

Security software maker Check Point Software, on the other hand, downplayed the importance of the purchase. "Looks like they are following in the direction that we started in over a year ago," said Sweta Duseja, product marketing manager. "We have seen significant deployment."

While virtual private networks based on IPSec are extremely secure, they require specialized software at both the remote user's location and at headquarters. SSL-based VPNs are easier to establish because every remote user already has a Web browser that has the necessary support for the technology. Nokia, Nortel Networks and Aventail have products based on the technology.

"We think SSL is going to cannibalize a lot of the IPSec space," Pescatore said. "SSL makes so much sense for most enterprises (that) we see it growing."

IPSec-based networks will remain in demand as a strong solution for connecting two networks via an encrypted communications line, Pescatore said. Such site-to-site VPNs could be used to connect branch offices to a company's main office, for example.

David Flynn, vice president of marketing for NetScreen, was quick to stress that the acquisition is about adding to the company's product line, not replacing its current VPN offerings.

"We have done very well overall with our own (IPSec-based) VPN solution, but in site-to-site applications," he said. "the IPSec access solution out there doesn't always provide the best solution. Maybe for power users, but not for the average remote user."

Last month, market researcher IDC said that the security device market grew 10 percent in the second quarter, compared with the same quarter the year before. NetScreen had the largest gain, increasing its revenue by 92 percent, to $53.2 million for the quarter.

NetScreen expects the deal to be completed by the end of the year.