NA to sell off some PGP tools, dissolve unit

Network Associates Inc. has dissolved its PGP Security business unit and plans to sell off the division's gateway firewall and encryption products. PGP's other technologies, including the CyberCop vulnerability assessment tool, PGP VPN, PGP E-Business Server, and PGPfire will be branded and sold as McAfee tools.

The PGP unit, with 250 employees, accounted for about 9 percent of revenues at Network Associates. The PGP name was introduced more than a decade ago when Phil Zimmerman developed the Pretty Good Privacy mail encryption product, which was later sold to Network Associates. McAfee director of marketing Michael Callahan said there were a number of reasons why the security vendor, whose big sellers are antivirus and helpdesk software, wants to sell off the Gauntlet and WebShield firewall/VPN appliances.

PGP encryption products didn't garner big sales, but in a larger sense, encryption is a "complicated" technology, said Callahan and Network Associates decided it wasn't worth the effort in terms of the returns. The WebShield firewall/VPN appliances and the Gauntlet gateway firewall--one of the very first commercial firewalls, originally developed by Trusted Information Systems and later acquired by Network Associates-were not successful for the company in terms of sales. "Guantlet is just not going to win that one," Callahan said, adding that another buyer of those PGP assets might make a better go of it.

While Network Associates is ready to abandon the gateway firewall market, it will still fight for the desktop firewall sector with its PGPfire personal firewall. "We want to focus on the desktop," Callahan said.

Callahan said the products now up for sale will be maintained in terms of any necessary bug fixes, but there won't be future product editions from Network Associates.

The selling-off of the PGP name and products is the first major re-organization since George Samenuk became CEO last January. Network Associates may end up hiring many of the 250 employees from the PGP unit for its other divisions, Sniffer, McAfee and Magic, which have seen stronger growth. PGP head Sandra England is expected to remain with Network Associates, Callahan noted.

The announcement coincides with the release of the company's third quarter 2001 results. During the period, which ended Sept. 30, Network Associates lost nearly US$11.3 million. Revenue was $209 million, including McAfee.com, or $193 million without. Including McAfee.com's results, this translated into a loss of approximately $11.3 million, or $0.08 per share. Without McAfee.com's results, NAI earned $8.5 million, or $0.05 per share. Estimates by Thompson Financial/ First Call had the company breaking even for the quarter. The company ended the quarter with $956.8 million in cash and securities.

The IDG News Service contributed to this report.

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