NetScreen Eyes Neoteris With Acquisition

Security appliance manufacturer NetScreen Technologies Monday said it has inked a deal to purchase Neoteris for $245 million in stock and $20 million in cash, including options.

The proposal will have to go through some legal hoops, including antitrust clearance, but the two Sunnyvale, Calif.-based firms say things should resolve by the end of 2003. The plan is to use Neoteris “clientless” secure sockets layer virtual private network remote access platform as a core piece of NetScreen’s product strategy. The technology lets remote users securely access corporate resources via a standard Web browser. NetScreen said it would also use Neoteris’ assets to bring more application-level security products to market.

NetScreen execs are pinning their hopes on the emerging SSL-based remote access market, which research firm Infonetics Research estimates will exceed $600 million by 2006. The company points to its success in transforming itself in the security appliance sector after it paid $40.3 million in stock to acquire OneSecure in August 2002.

“While IPSec is the best technology for site-to-site VPN deployments, we believe Neoteris’ advanced SSL VPN solutions will become the preferred solution for new, and expansion of existing, remote access deployments,” NetScreen president and CEO Robert Thomas said in a statement. “This acquisition will not only strengthen our portfolio of end-to-end security offerings, it will allow us to drive adoption of SSL VPN technology as the preferred option for remote access deployments and position NetScreen for success in this growing market.”

In addition to technology, NetScreen is also gaining more than 550 Neoteris customers including the likes of Deutsche Bank, Borland Software and SAS, as well as approximately one million users worldwide.

“Our clientless SSL solution has been well received and adopted by many highly recognized enterprise customers,” said Krishna “Kittu” Kolluri, president and CEO of Neoteris, who will join NetScreen as general manager responsible for NetScreen’s secure access products. “With NetScreen’s complementary products, growing enterprise customer-base and strong channel, we believe this combination can help increase market success and accelerate customer adoption of our SSL VPN products, as well as our complementary application security gateway solutions.”

With the acquisition, NetScreen is already claiming industry leadership with recent Gartner, Frost & Sullivan and In-Stat/MDR all showing Neoteris as the lead company in its SSL VPN revenue and/or market share.

But the road to dominance is steep and full of competitors like Check Point Software, SonicWALL, and WatchGuard Technologies.

In addition to the cash and stock, NetScreen said it will also take over all outstanding Neoteris options. As an extra incentive, NetScreen said it will also pay Neoteris stockholders and option holders up to an additional $30 million in cash.