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Network Associates climbs to top

With the acquisition of firewall firm Trusted Information Systems, Network Associates claims it's the leading security software provider.

    With today's acquisition of firewall vendor Trusted Information Systems (TISX), Network Associates (NETA) claims it's the leading security software provider.

    Starting with its own McAfee antivirus software, Network Associates chief executive Bill Larson has filled out the company's security offerings in a four-month shopping spree. Larson now calls his company the largest security software vendor in the world.

    Today's acquisition of TIS brings Network Associates a firewall, virtual private network technology, a security research and consulting organization, and RecoverKey. That software lets companies store copies of employees' cryptographic keys so encrypted data can be recovered if someone forgets a passcode or leaves the firm.

    Network Associates itself was created by last year's merger, announced in October, of McAfee and Network General, a network management firm. Network Associates is due to ship its new CyberCop intrusion detection software--designed to keep hackers away from sensitive corporate data--on Friday.

    In November, Network Associates acquired Pretty Good Privacy, a pioneering cryptography firm with desktop and server-based software for encryption. PGP also has software to issue and manage digital certificates.

    "We will be extremely active in digital certificate software, and as the Wal-Mart of software, we will be aggressively priced," Larson said today, indicating that the company sees digital IDs as a way to offer "single sign-on" capabilities so corporate users don't have to use separate passwords for each application or database within a company.

    Most analysts say that covers most of the basic security technologies required by corporate users, but Network Associates admittedly is still weak in software that manages all those pieces.

    "In the policy management area, we have more work to do," said Peter Watkins, a Network Associates vice president. "We have the basics already covered."

    Added Steve Walker, TIS's chief executive: "We do have all the basic technologies available to use to move ahead. This whole policy management issue that PGP has started on, we at TIS have done ourselves. We are further along with it collectively than anyone else."

    Network Associates is ahead of other security firms because it has its own antivirus software, something other security companies lack or get through partnerships.

    The companies positioned the acquisition as having no overlapping products, but a closer look suggests otherwise. Network Associates had a low-end firewall that it threw into its security suite for free, while TIS's Gauntlet firewall is considered a high-end offering. That gives the Network Associates sales force an "up-sell" in that market.

    The companies say Network Associates' CyberCop intrusion detection software works at the application level, while the TIS intrusion detection software, bought last year with Haystack Laboratories, scans networks for break-ins.

    Both Watkins and Walker agreed that merging the intrusion detection offerings would be a logical direction for the companies, although that would take some time.

    Despite Network Associates' claims about its security offerings, one Wall Street analyst thinks the company's shopping spree isn't over. The company recently raised $300 million in a bond offering, earmarking the money for acquisitions. But the TIS deal was made with stock, not cash, leaving Larson a slush fund for more deals.

    Bruce Smith, a financial analyst with Merrill Lynch, expects more acquisitions in security and network management.

    But Zona Research analyst Jim Balderston wonders if Network Associates and firewall vendor Check Point may get too big for their own good.

    "If they grow so big that they're multibillion-dollar companies and if, as we think will happen, security software is absorbed into the network and routers, are they growing themselves into a size where they cannot be absorbed?" he asked.

    If that does occur, they're left to go to head with the real high-tech titans--Cisco, IBM, Microsoft, and Compaq, Balderston suggested.