March 8, 2002 2:25 PM PST

Security company drops PGP encryption

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Software company Network Associates has stopped marketing its PGP e-mail encryption software, a further sign that privacy products are a tough sell.

The Santa Clara, Calif.-based company began selling PGP, or Pretty Good Privacy, to corporations in 1997 after it bought the software business from the technology's author, Phil Zimmerman. The software, downloaded by millions of consumers worldwide and used for encrypting e-mail messages, has historically been freeware. The company ceased giving it away to consumers nearly a year ago, but the software continues to circulate the Net through free download sites.

"Effective March 1, we're no longer selling desktop and wireless encryption," Network Associates spokeswoman Jennifer Keavney said.

"The reality is it didn't become a large enterprise sell, and it maintained its perception as a freeware product. People around the world are still using it for free," she said.

Despite consumer and corporate concern for privacy and security, many such technologies suffer in the commercial market because of poor demand. Security software maker Zero-Knowledge Systems, for example, late last year stopped selling its core technology product, which let consumers surf the Web anonymously. The company failed to convert enough free users into paying customers.

Network Associates' decision to stop selling the software comes partly because it couldn't find a buyer for the PGP unit. In October, the company announced that parts of the PGP business would be for sale and that other parts would be folded back into its McAfee business unit.

Gartner analysts Vic Wheatman, John Pescatore and Joyce Graff say Network Associates had sales difficulties with its desktop e-mail security system, Pretty Good Privacy (PGP), because enterprises simply found it too difficult to use and manage.

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"They've come to the conclusion that they're not going to be making any money on it," said Richard Hunter, vice president of security research at GartnerG2, a division of research firm Gartner.

"It's not a good sign for secure e-mail demand, despite consumers' concern for online privacy. There's certainly some demand for encryption technology in certain industries such as financial services, but it appears that there's not enough that giving the product away is an attractive means of selling something else."

Eighteen employees were laid off as a result of Network Associate's disbanding the PGP unit.

The PGP technology remains a part of McAfee's e-business server, personal firewall and VPN (Virtual Private Network) client. Network Associates said it will continue to support its enterprise customers for the PGP technology until their contracts expire.


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