Network Associates Sells PGP Line

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Following a fitful yearlong search of a buyer for two lines of its privacy products, Network Associates sold off its wireless and desktop lines of PGP encryption products to PGP Corp., a Palo Alto, Calif.-based startup.

The deal calls for PGP Corp. to acquire PGPMail, PGPfile, PGPdisk, PGPWireless, PGPadmin, and PGPkeyserver, in addition to PGPsdk software development kit and PGP Corporate Desktop. Network Associates will keep products developed using PGPsdk encryption development software, including those serving McAfee anti-virus software: McAfee E-Business Server for encrypted server-to-server file transfer, McAfee Desktop Firewall, and McAfee VPN Client.

Financial terms of the transaction were not disclosed.

"Customers will benefit from PGP Corp.'s dedication to the continued development of PGP desktop and wireless technology," said Sandra England, Network Associates' executive vice president of business development and strategic research, in a statement.

Santa Clara, Calif.-based Network Associates will continue to serve clients using the desktop and wireless PGP products until October, when PGP Corp. will take over service.

Network Associates announced in October 2001 that it would sell off its PGP encryption and Gauntlet firewall product lines, in order to concentrate on three business areas: anti-virus software; network and application management; and Web-based service desk software. Secure Computing Corp. purchased Gauntlet for an undisclosed sum in February.

However, in March, five months into its search for a PGP buyer, Network Associates said it would halt its search, after receiving disappointing offers.

Network Associates eventually found a buyer thanks to Doll Capital Management and Venrock Associate, which invested $14 million in newly formed PGP Corp. The VCs are staking their money on the continued popularity of the decade-old PGP encryption technology .

PGP, which stands for "pretty good privacy," was developed as a freeware program by Phil Zimmerman in the early 90s to provide secure e-mail and file storage using a public key system. Network Associates bought the technology in 1997.

In the past decade, PGP has become the standard for e-mail encryption, despite a brief tangle with the U.S. government over national-security concerns. The government dropped the case, but some foreign governments still restrict the use of the encryption technology.

Network Associates has been embroiled in a drawn-out attempt to buy the 22 percent of McAfee.com shares it does not already own. McAfee.com's management, board of directors, and shareholders rejected Network Associates' bids as too low. Last week, Network Associates' raised its bid again, and McAfee.com has formed a special advisory board to recommend action.

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