NEWS

Network Appliance to Acquire Decru

Associated Press
06.16.2005

Network Appliance Inc., a maker of data storage systems for businesses, said Thursday that it is buying Decru Inc., a private provider of network encryption products, for $272 million in cash and stock.

"We view data encryption as being a potentially explosive market opportunity," Chief Executive Dan Warmenhoven said. "All you have to do is look at the past six months and major corporations that have had significant data loss." He cited the recent loss of tapes with Citigroup Inc. customer information by UPS Inc. as a recent example.

Redwood City, Calif.-based Decru makes a security platform called DataFort that protects data inside of the traditional "firewall" used to keep unauthorized users from penetrating a network. Its products use a layer of encryption, authentication, access controls and compartmentalization techniques, Network Appliance said.

The two companies have collaborated over the last year on products combining Decru's DataFort products with Network Appliance's disk-based storage offerings. Network Appliance said it also expects Decru to continue making products for a variety of storage system types, including tape backup.

Sunnyvale-based Network Appliance said it expects the acquisition to close by October, subject to certain regulatory approvals and closing conditions. Warmenhoven said costs related to the acquisition will decrease profit by less than 1 cent per share for each of the ensuing three quarters, and then will begin adding to earnings in the summer of 2006.

"For the quarter ending July 2006 it should be accretive by about a penny," Warmenhoven said.

Analysts surveyed by Thomson Financial expect the company to earn 79 cents per share for fiscal 2006.

Decru, which will become its own unit within Network Appliance, said it plans to continue to work with a variety of storage and networking vendors. Network Appliance rival EMC Corp. also is a major Decru client.

"If you look at storage products we're 10 percent of the market," Warmenhoven said. "We'd like to see Decru address 100 percent of that market."

Network Appliance added that the acquisition also will strengthen its existing data protection offerings, which include disk backup and recovery products and software for data replication and restoration.

Decru was founded in 2001 and has raised more than $45 million in venture financing from investors including Benchmark Capital, Greylock, New Enterprise Associates and In-Q-Tel.

Shares of Network Appliance rose 28 cents to $30.08 in midday trading on the Nasdaq.