Security companies merge

Spyrus, which makes smart cards and other security hardware, is acquiring Internet security software firm Terisa Systems in an all-stock deal of undisclosed value.

The acquisition, to be announced Monday, follows a partnership formalized in January for the two private firms to combine their cryptographic toolkits, protocols, and applications for Internet and intranet products. The deal creates a strong player in both security hardware and software for Internet commerce.

Terisa also disclosed today that WebTV will announce next month that it's using a new Terisa software toolkit to enable secure transactions over WebTV devices. WebTV, which is being acquired by Microsoft, is using an early version of a Terisa security toolkit for "thin clients" or Internet appliances.

"We see the acquisition as a strategic combination of the leader in smart card security and the leader in Internet security," said Ken Mohr, Terisa director of product marketing. "We have a single focus: securing the contents of electronic transactions."

Spyrus CEO Sue Pontius, who founded the company in 1992 with Jan Dawson, will remain CEO of the merged company. Allan Schiffman, Terisa's CTO and founder, will become CTO of Spyrus, which is profitable today.

Spyrus' flagship product is the Lynks privacy card, a PCMCIA card that can store up to 50 different digital IDs. Both companies are active in technologies for secure Internet transactions, including credit card sales using the Secure Electronic Transactions protocol, and have several common customers.

Terisa markets an SET security toolkit and created the "reference implementation" that is being used to test other vendors' SET software for compatibility. Spyrus announced earlier this week that its hardware technology will be used in a key piece of the SET public key infrastructure.

Mohr said Spyrus will pursue new markets in online banking, messaging, electronic data interchange (EDI), health care, postal services, and legal services.

Terisa Systems, formed in April 1995, was created when Netscape and Enterprise Integration Technologies, a company later acquired by VeriFone, agreed to support each other's security protocols.

Netscape, EIT, and encryption company RSA Data Security contributed technology to Terisa, which raised cash investments from America Online, CompuServe, IBM, and later Motorola. Those firms are now Spyrus shareholders.