NetScreen to Acquire Neoteris

Neoteris is one of the leaders of the growing SSL virtual private network market.

Security appliance vendor NetScreen Technologies Inc. on Monday announced that it has agreed to acquire Neoteris Inc. for $265 million. The move signals NetScreens intention to expand its product portfolio and become a more diversified company.

Neoteris is one of the leaders of the growing SSL virtual private network market. The companys flagship product is its clientless SSL VPN, which enables companies to provide secure remote access to their networks, partners, customers and others without having to deploy a VPN client.

NetScreen officials said the VPN product would be a good complement to NetScreens existing line of appliances. The boxes currently can include a variety of security functionality, such as firewall, IPSec VPN, denial-of-service protection and intrusion prevention. As part of the acquisition, all of Neoteris 160 employees will join NetScreen, and Krishna Kolluri, Neoteris CEO, will become general manager of the SSL VPN business at NetScreen.

"I believe this move can help increase customer adoption of SSL VPNs," Kolluri said.

Neoteris also brings its application security gateway technology to the new company. The gateway includes access-management features that enable secure Web-based single sign-on.

NetScreen will pay $20 million in cash to Neoteris and will issue 10.9 million new shares of stock to cover the remaining portion of the acquisition price. Also, if the company achieves some revenue goals, Neoteris shareholders will get up to $30 million in cash. The purchase has already been approved by the boards of directors of the two companies, which are both based in Sunnyvale, Calif.

NetScreen CFO Remo Canessa said Monday that he expects the transaction to have a neutral effect on the companys earnings in fiscal 2004. Although he forecasts an additional $33 million to $37 million as a result of the Neoteris acquisition, Canessa said NetScreens operating expenses will increase by nearly the same amount.

The companies expect the deal to close by the end of this year.