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An antivirus booster shot

Network Associates is on a sumo wrestler's diet, swallowing up other companies to get big fast so it can compete with security and network powerhouses.

Network Associates is on a sumo wrestler's diet, swallowing up other companies to get big fast so it can compete with powerhouses like Computer Associates and IBM's Tivoli unit in the security and network management market.

The vendor formed last year out of the merger of McAfee Associates and Network General has been on a buying binge the past six months to bolster its offerings. The latest purchase came today with a $650 million stock swap for Dr. Solomons, a British maker of high-end antivirus software.

"To steal a line from the Godzilla press, 'Size does matter,'"said John Powers, analyst at BancAmerica Robertson Stephens in San Francisco. "Network Associates [with this purchase] is now right on the verge, if not already at, a $1 billion company revenue rate. And while that is still relatively small compared to the likes of CA, Network Associates is now a big multichannel, aggressively managed software company."

Powers added that the Santa Clara, California-based vendor "has shown over the last year that it can be a consolidator and a real player in the systems network management software arena. It has the size and aggressiveness to compete with CA and Tivoli."

But at what price?

Security analysts, who have watched Network Associates gobble up three other security vendors in the last six months, viewed the Doctor Solomon's acquisition as a play for European distribution of its other products. In terms of new functionality, they consider the acquisition largely redundant to Network Associates' core McAfee antivirus software.

"They were looking for a much larger European distribution channel because that's where Doctor Solomon has been most successful," said Jim Hurley, Aberdeen Group network security analyst.

"Network Associates has valid reasons--to enhance market share in their core business, get rid of a competitor, and adopt their revenue stream--but it's a hellluva lot of money," said Ted Julian, who follows network security at Forrester Research.

"To me, the bottom line is opportunity cost--they're spending an ungodly amount of money on this company," Julian added. "How many Trusted Information Systems or Pretty Good Privacies could they have bought but can't buy now?"

TIS, a firewall company Network Associates bought earlier this year and PGP, a pioneering encryption software company purchased in late 1997, are only Network Associates' highest-visibility security acquisitions.

Last month Network Associates closed its purchase of Secure Network Incorporated, a Canadian firm that specializes in scanning software that probes networks for security holes.

And the merger that created Network Associates in 1997 gave the combined firm antivirus software from McAfee Associates and Network General's Cyber Cop, a network sniffer that scouts for unauthorized users on networks.

Network Associates' strategy has been to converge acquired products with its own, initially into three suites--antivirus, security, and network management. Eventually its antivirus suite will be folded into the security suite, and network management is expected to be folded in too.

Network Associates aims to have management consoles for each suite for central management of disparate software.

"We can plug any acquisition into our console," Network Associates vice president Tracey Mustacchio said in February. "We need to create an application for IS that integrates security and network management." She indicated then that such integration might be finished by the end of 1998, although that date may slip with recent acquisition.

But some competitors note that melding separate products built on different architectures is easier said than done. And no one disputes that integrating products from a single company into a seamless offering is easier than taking disparate products from other vendors and making them work together.

Powers predicts that while 1998 is the year for Network Associates to meld operations of its recent purchases, next year will be a more vital time to watch as engineers take on the tricky task of tying together the various pieces of technology the firm has gained the past year.

"The thing to probe here is [Network Associates CEO] Bill Larson has set down an enormous smorgasbord. At what point do you say, 'Give me the Pepto-Bismol?'" Powers said. "There is a two-phase risk process. There is a sales and execution risk process in the near term and a product integration phase in the long term. My bet is they will work both through successfully."