SafeNet buys Rainbow, is NetAss 2.0?

[R. A. Hettinga]

<http://www.theregister.co.uk/content/55/33565.html>

The Register

  23 October 2003
  Updated: 23:14 GMT



SafeNet seeks gold in Rainbow
By John Leyden
Posted: 23/10/2003 at 20:32 GMT


 
SafeNet, the networking security firm, is scooping up rival Rainbow
Technologies for $457 million (at today's prices) in new stock.

Post-merger, Rainbow shareholders will own approx. 43 per cent of the
enlarged company.

Both companies have strong ties to the US government and military. Rainbow
Technologies worked with the NSA in developing the latter's controversial
Clipper chip proposal in the 1990s (before the idea was shelved because of
industry and public opposition to the idea of building government back door
access into communication networks). SafeNet was set up by former NSA
spooks in the late 1980s.

These days, Rainbow specialises in authentication tokens and anti-piracy /
DRM software, while SafeNet develops WAN and Virtual Private Network,
encryption and security technologies.

Together, the companies aim to become the "premier network security
provider for the government and large financial institutions, mid-sized
firms, OEMs, and consumers".

The merger is subject to the approval from both sets of shareholders and is
expected to close during Q1 2004.

Rainbow brings approximately $70 million in government business to SafeNet.
SafeNet forecasts that the merger will be accretive to earnings in the
first quarter after the deal concludes.

SafeNet yesterday reported revenues for the three months ended September 30
(Q3 2003) of approximately $17.6 million, double the $8.8 million it
recorded in Q2 2002. SafeNet's net income for Q3 2003 pegged out at
approximately $2.6 million.

The results reflect the effect of two full quarters from the operations of
crypto outfit Cylink Corporation, which SafeNet acquired in February this
year. Since then SafeNet has been on an acquisition roll.

First, it purchased certain assets from Raqia Networks, a developer of
programmable systems-on-a-chip and co-processors designed for content
inspection. Last week SafeNet signed an agreement to acquire the assets of
the OEM Products Group of SSH Communications Security for approximately
$14m in cash. And now it's snaffled up Rainbow.

The security industry hasn't seen the likes of this since Network
Associates' acquisition spree in the heady days of the mid to late 1990s. .


-- 
-----------------
R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'