The merger agreement last month of two companies in the computer network software field may take the Internet security market to a new level of maturity.
Network Associates Inc., itself the product of mergers of companies well known in data security circles, said it would make an exchange of stock valued at $300 million for Trusted Information Systems Inc. of Glenwood, Md.
The combined organization would probably be the largest provider of the software that guards corporate networks and their access to the Internet. Such security systems are vital to banks and others that hope to partake in the anticipated electronic commerce boom.
Formed by the merger of McAfee Associates and Network General last October, Network Associates will be able to offer software in at least five security subsegments: anti-virus, encryption, authentication, firewall protection, and intrusion detection.
"This acquisition is about making the Internet a safe place to do business," said Stephen T. Walker, chief executive officer of Trusted Information Systems. "It reflects a crucial step in the evolution of true enterprise-scale security networks."
With the more diversified offerings, Network Associates can assemble multi-product "suites" and boost revenues through more specialized consulting services.
"The ability to tie all of these components together in a centralized management environment is critical to customer success," said Bill Larson, chief executive officer of Santa Clara, Calif.-based Network Associates, which reported revenue of $612 million in 1997.
"We have delivered on our commitment to have a complete security package," said Mr. Larson, who has pushed for rapid consolidation of a business responding to corporate demands for what marketers call "enterprisewide solutions."
The former McAfee Associates made its name developing the anti-virus software used by 80% of Fortune 100 companies and on 60% of all corporate Internet sites.
Network Associates added an encryption and authentication technology with more than four million users with its December acquisition of Pretty Good Privacy Inc., a company founded by data encryption advocate Phil Zimmerman.
Trusted Information Systems will fill other security niches with its Gauntlet firewall technology and its Stalker misuse detection system, which complements Network Associates' CyberCop intrusion detection system.
"Once you have established the notion that people can't maraud through your system, intrusion detection is the next thing to see if something strange is going on," Mr. Walker said.
Gauntlet firewalls, which cost between $5,000 and $17,000 depending on the number of system users, are second in market share to those of Check Point Software Technologies Ltd., an Israeli company with U.S. headquarters in Redwood City, Calif.
Because they have more assets stored electronically than the typical corporate user, financial institutions understand the issues addressed by companies like Network Associates.
"I think a lot of them would look at this merger favorably because it will hopefully consolidate a number of disparate products into an integrated whole," said Chris Christiansen, an analyst at International Data Corp. in Framingham, Mass.
"Integrating stand-alone products can be both costly and dangerous," Mr. Christiansen said. "If you are not careful, you can create as many holes as you cover up."
Trusted Information Services and Pretty Good Privacy were on opposite sides of the data encryption controversy in Washington.
Trusted's RecoverKey program was among the first to permit recovery of lost or unknown secret keys, a system favored by the Department of Commerce for allowing the export of high-powered cryptography. The U.S. government has sought to control the exports of very strong coding mechanisms, to keep them out of the hands of terrorists and foreign enemies.
Mr. Walker, a onetime National Security Agency researcher, has cultivated strong contacts with federal policymakers.
Mr. Zimmerman and his Pretty Good Privacy were at odds with the government, once being prosecuted for making strong encryption freely available on the Internet, though the charges were dropped.
Although Mr. Zimmerman retains strong ties to the civil-libertarian community, Mr. Larson said Network Associates' corporate customers are increasingly requesting key recovery because it improves their management of encrypted documents.