Networks with Intel inside: Computer giant picks Shiva for VPN expertise

Coming as a surprise to many industry watchers, computer systems manufacturer Intel Corp. announced last week that it would acquire Shiva Corp., known for its virtual private networking and remote access products, in a deal worth $5 million. According to the companies, the move was made to better serve the Internet needs of small to medium-sized business customers.

"We have a vision of a billion connected computers over the next decade," said Mark Christensen, vice president of Intel's network products division, of which Shiva will be a wholly owned subsidiary.

The companies say they are combining Shiva's business access solutions experience, "core competency" in VPNs and remote access technology and "telecom-focused" sales force with Intel's experience in Ethernet technology, frame silicon design and volume manufacturing and distribution.

But the key thing Intel and Shiva have in common is their desire to provide services to the small to medium-sized business market. "We've served the same customer base and now, together, we can provide new services to them," Christensen said.

The deal will bring tremendous benefits to both sides, said James Zucco Jr., chairman and CEO of Shiva. "We're convinced that this will quickly advance the technology of small to medium business organizations that have not yet been served," he said, adding that the combined companies will better serve telecommuters as well.

The deal will take 30 to 60 days to be approved and the companies will work independently until that time, Zucco said.

It's a surprise that Shiva, which has previously been approached by Ascend Communications for its VPN capability, would be chosen by Intel, said John Girard, an analyst with The Gartner Group who has tracked Shiva's progress for some time. But it's an interesting fit, he added. "It's a way for Intel to break its dependency on Microsoft. It sets them apart to be a networking solutions provider." The agreement is a boon to customers of Shiva, which recently has had low market share, Girard added.

As part of the deal, Intel will benefit from new services from Shiva, which were announced at Networld+Interop. Among these was the capability to send voice over IP over a VPN, which Shiva achieved by partnering with Clarent Corp. The application combines Clarent's voice-over-IP gateway with Shiva's LAN-over-VPN gateway to increase transmission security, said Keith Thompson, chief architect for Shiva.

"There was a concern to try to transmit it this way without losing the voice quality," he said. "We've demonstrated that it can, and that most people can't even tell it's a voice-over-IP call."

Before this announcement, Christensen said Shiva's voice-over-IP experience would benefit Intel. "Obviously we acquired Shiva with plans that together we'd have a very strong voice-over-IP story," he said.