COMBO SHAKES UP VPN SECTOR

Virtual private network hardware vendor NetScreen Technologies is buying Neoteris, a developer of Web browser-driven VPN software, in an acquisition that hints at future consolidation in the VPN product market just as vendors are starting to woo wireless carriers.

NetScreen and Neoteris executives said the deal, for $245 million in stock and $20 million in cash, matches the former's IP Sec-based products with the latter's “clientless” solutions using secure socket layer (SSL) technology.

“This deal will allow us to cover a much larger part of the growing network security market,” said Robert Thomas, president and CEO of NetScreen. The SSL market is expected to be worth $600 million by 2006, according to Infonetics Research.

“This combination can help accelerate customer adoption of our SSL VPN products,” said Krishna “Kittu” Kolluri, president and CEO of Neoteris, who will join NetScreen as the company's general manager for secure access products.

IP Sec and SSL solutions are quickly becoming complementary, said David Flynn, vice president of marketing at NetScreen. “IP Sec VPNs are still best for site-to-site needs, but SSL browser-based access doesn't require client software installation,” Flynn said.

Kolluri echoed that sentiment. “The vast majority of companies that have IP Sec VPNs have deployed them to less than 20% of their user base, which shows that IP Sec isn't the best for remote access provisioning because of client-side installation issues,” he said.

Another VPN company, IP Dynamics, acknowledged a looming consolidation trend.

“The market challenge will increase because other IP Sec vendors like Cisco [Systems] may try to do what NetScreen has done, but we don't have a clear vested interest in partnering with an IP Sec or SSL player,” said Hasan Alkhatib, president and CEO of IP Dynamics, whose Virtual Community Network, or VCN, technology is an alternative to both IP Sec and SSL.

Alkhatib said his company isn't for sale but added, “If we get an offer we can't refuse, it's an offer we can't refuse.”

The market shake-up could happen just as VPN vendors are starting to make a play for wireless carriers hoping to win enterprise business. IP Dynamics' VCN, designed for carriers wanting to create a secure VPN access layer, is network agnostic. And Neoteris offers VPN access for Symbian and PocketPC devices.