Re: PGP Inc Sold for $35M - News Flash

[Vin McLellan <vin@shore.net>]

WSJ Article, by Lisa Bransten (WSJ Interactive Edition)

"McAfee Announces Name Change, Acquisition of Pretty Good Privacy"

McAfee Associates Inc., a Santa Clara, Calif., maker of
network-security software, said Monday that it agreed to acquire
Pretty Good Privacy Inc., a privately held maker of encryption
software, in a deal valued at $36 million.

Separately, McAfee completed its acquisition of Network General and
said it was officially changing its name to Network Associates Inc.

[snip...]

One investment banker estimated PGP's revenue at almost $8 million
this year and at as much as $18 million next year. [Network Associates
Chairman and CE0 Bill] Larson said Network Associates made an all-cash
offer for PGP because of the low price of shares of McAfee (now
Network Associates).

Mr. Larson called the acquisition "a reflection of how significant
an opportunity we see in the security market." Mr. Larson called PGP
a "neophyte" but also "a strategic player" in security software,
adding that Network Associates "will be a player in this market."

[snip...]

PGP, based in San Mateo, Calif., was once a leading contender for an
initial public offering but ran into troubles in the middle of the
year as sales stagnated and a planned acquisition of software
company Zoomit Corp. fell apart. Zoomit makes software that allows
for easy communication across different networks.

PGP founder and chief technologist Philip Zimmermann has developed
something of a cult following among software programmers and
cyber-rights activists since the early 1990s, when he started giving
away his Pretty Good Privacy program, which allows computer users to
encrypt electronic messages sent over the Internet.

Mr. Zimmermann distributed the software for free in order to get it
into the most users' hands amid growing concerns that governments
would try to limit the use of encryption technology, fearful that
such technology would stymie law-enforcement agencies' efforts.
Appetite for the software proved large and millions of copies of the
software were downloaded by users around the world.

Mr. Zimmermann's case became a cause celebre among activists when
the Justice Department opened an investigation of him for allowing
the software to be distributed internationally. Although the
government allows the use of such encryption technologies in the
U.S., it doesn't allow the export of strong-encryption software
except in special circumstances.

In 1996, the government dropped its investigation of Mr. Zimmermann,
and in March of that year he and several partners incorporated PGP
to sell commercial versions of the software to large corporations
interested in security. Mr. Zimmermann will stay with the company as
a Network Associates Fellow.

[snip...]

"We get a great group of leading cryptographers," [Larsen] said. "There
are very few of these people in the world, and PGP has always been a
magnet for [them.]"

PGP, which has about 50 employees, has fought to have its encryption
software adopted as a standard, but software giants Microsoft Corp.
and Netscape Communications Corp. have both licensed the encryption
software of PGP rival RSA Data Security Inc., which was itself
purchased last year by Security Dynamics Technologies Inc.

Before Monday's announcement, several observers had said that PGP
and McAfee would be a logical combination because companies are
looking for software that can address more than one of their
security and networking needs. Also, PGP's encryption technology and
large installed user base could bolster McAfee's recent entry into
that field, they said.

PGP has "good brand recognition and good technology, but no
marketing muscle," said one industry watcher. "If PGP's encryption
standard is going to compete, they need a distribution partner like
McAfee behind them."

Shares of Network Associates will begin trading under the new Nasdaq
symbol NETA on Tuesday.

/end - WSJ Interactive, Bransten text/

      Vin McLellan + The Privacy Guild + <vin@shore.net>
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