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NetScreen SSL Move Likely

Secure Socket Layer VPNs are becoming all the rage this summer. And VPN (virtual private network) appliance maker NetScreen Technologies Inc. (Nasdaq: NSCN) is looking to get a piece of the action.

After Nokia Corp. (NYSE: NOK) announced its new, home-grown SSL product last month (see Nokia Sweetens SSL ), NetScreen may now feel there is more urgency to do a deal, say sources.

Various reports have had the company looking to acquire an SSL startup for a while. A small Silicon Valley startup called uRoam Inc. has long been cited as a top candidate.

“My sense is that they have been waiting,” says one equities analyst who didn’t want to be named. “But there’s definitely been a lot more talk lately about a possible acquisition.”

NetScreen and uRoam officials both declined to comment on these rumors.

SSL VPNs allow remote users to securely access corporate networks via a Web browser. Unlike IPSec VPNs, SSL doesn't require client software to be downloaded onto a user’s PC. Its inexpensive and extensive reach has made it an attractive option for many enterprises looking to extend remote access capabilities to more workers.

Nokia's move may point to the growing importance of SSL technology. Instead of using software from its partner Check Point Software Technologies Ltd. (Nasdaq: CHKP), Nokia has developed its own product.

”It would be a good idea for these guys to integrate SSL into their solutions, since customers will be asking for both IPSec and SSL,” says Steven Harris, an analyst with IDC.

Erik Suppiger, an analyst with Pacific Growth Equities Inc. met with NetScreen’s management in early June. He says that the company’s CTO was clear about NetScreen’s intentions to integrate SSL into its solution. But he adds that it’s not clear if NetScreen will try to develop the technology on its own, as Nokia has done, or whether it will add the technology via an acquisition.

The company is already partnering with another small SSL startup, SafeWeb Inc. (see SafeWeb Joins NetScreen Alliance). Currently, NetScreen is only reselling the SafeWeb gear to customers that specifically request an SSL solution.

If history is any indication, NetScreen is likely looking to buy. Last year NetScreen spent $40.3 million on OneSecure, an intrusion detection and prevention startup, even though it already had some intrusion prevention software of its own (see NetScreen Acquires OneSecure). The company was very successful in keeping key members of the OneSecure team and has begun integrating the technology into its product line.

URoam is probably not the only company that NetScreen has looked at buying. Neoteris Inc. and Aventail Corp. are the most widely known SSL vendors. And then there are a several smaller players like Aspelle Ltd., Netilla Networks Inc., SafeWeb, URoam, and Whale Communications Ltd.

But most experts say that uRoam is the most likely candidate. For one, the small 50-person startup is located in the same town as NetScreen. Proximity also played a role in the acquisition of OneSecure. It too was located in Sunnyvale.

“URoam is the most attractive private company for NetScreen,” says one equities analyst who didn’t want to be named. “NetScreen could get them pretty cheap. Neoteris is overpriced for most public companies these days.”

— Marguerite Reardon, Senior Editor, Light Reading

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