Network Associates cuts PGP unit

Network Associates Inc. on Thursday announced that it is eliminating its PGP Security division, a move that will result in 250 layoffs.

The company also announced that it is discontinuing its PGP desktop encryption and Gauntlet firewall products and putting them up for sale.

PGPs remaining encryption products will be integrated into the companys McAfee and Sniffer divisions.

The moves are a part of Network Associates effort to return to profitability by the end of the year. The company announced a third-quarter loss of $11.3 million on Thursday.

CEO George Samenuk said he expects the dissolution of PGP and the other moves to save the company $50 million in 2002.

The decision to fold PGP into the other divisions was a difficult one, but company officials said they believe it will ultimately make Network Associates a stronger presence in the security market.

“We didnt see a clear path for those products to be number one in their categories, so we made the decision to put them up for sale,” said Michael Callahan, vice president of marketing at Network Associates in Santa Clara, Calif. “Its not great news everywhere because peoples lives will be affected.”

PGP, the first commercially available encryption product, was developed by cryptographer Phil Zimmermann in 1991 at the height of the federal governments battle to halt the manufacture and sale of strong crypto. He released the program as freeware in order to avoid these restrictions, but the government was still angry enough to open a criminal probe that would eventually last three years. Zimmermann founded PGP Inc. in 1996 to sell the software and sold his company to Network Associates in 1997.

In the next year, the company will integrate the PGP VPN and PGPfire personal firewall into McAfees ePolicy Orchestrator. They will also be re-branded as McAfee products and sold indi-vidually.

In addition to the 250 layoffs, another 150 PGP employees will be moved to positions within the other Network Associates divisions.