On news of its purchase of the information security firm, Cylink's stock surged 16 percent on very heavy volume to close day at 15-1/8, up 2-1/8 from Friday's close. The jump increased the value of the deal to $87 million at today's closing prices. Based on Friday's closing price, the deal was worth $83 million.
"[The acquisition] takes us into the realm of Internet remote access, which we believe is one of the booming markets of today," said Cylink chief executive Fernand Sarrat. "Our short-term strategic goal is to position ourselves as the provider of the best remote access solution for the Internet."
Algorithmic Research will operate as a separate subsidiary of Cylink. The Israeli firm offers security software and security technology currently used by 11 million pay-TV customers in France. It also provides patented smart card security technology, including smart card readers that plug into PC keyboards or PCMCIA slots.
Algorithmic's also makes a networked cryptography server; a public-key cryptographic toolkit, and virtual private network offerings. The products can be used as standalone security solutions or as building blocks to fit into other applications.
"Their development team is outstanding," Sarrat said. "We feel that the people are really the big asset we're paying for."
With 1996 revenues of $7.25 million, the profitable Algorithmic is expected to improve Cylink's financial results. It will continue to operate from its headquarters in Givat Shmuel, Israel, under current management.
Sarrat said the two companies' distribution channels also are complementary and that the two sales forces will now have additional fodder. "They are actually strong where we are not," he said, citing Algorithmic's success in France and Germany.