PGP acquired by merged firm

Encryption company Pretty Good Privacy today said it will be acquired by Network Associates, the new entity created by the merger of McAfee Associates and Network General.

Network Associates will pay $35 million in cash for PGP and the deal provides a missing element, encryption technology, in the company's security software.

"PGP is lot like an iceberg, with what you're familiar with being brand recognition, its encryption franchise for email, and desktop encryption," said Gene Hodges, a senior technical executive with Network Associates. "The below-the-waterline piece, in development for the last year, is its enterprise security management capability with authentication servers and security policy management."

But the acquisition also raises questions about the long-term viability of a security initiative McAfee announced in August with RSA Data Security, another encryption firm.

The SecureOne alliance was designed to create a single set of interfaces so software developers could build firewall, encryption, antivirus, and authentication features into their applications.

Also in the alliance were Security Dynamics (SDTI), RSA's parent, and certificate authority VeriSign, of which Security Dynamics owns a 26 percent share.

Bill Larson, Network Associates chief executive, said he called Security Dynamics chief executive Charles Stuckey before today's announcement to inform him of the acquisition and to urge that the SecureOne work on common interfaces go forward.

However, Larson said another part of that August deal--that McAfee would drop its desktop encryption software PC Crypto and market Security Dynamics' competing SecurPC software--has already fallen by the wayside.

"We do not want to compete with Security Dynamics, but to parnter with them," Hodges said. "We are going to make money in security from applications and management, not in [encryption] algorithms, not in hardware tokens, where Security Dynamics makes its money."

RSA president Jim Bidzos also downplayed any rivalry with PGP. "I don't see that it changes a thing. I don't think of PGP as a competitor of ours. We sell [security] toolkits and companies like Netscape and Microsoft take the toolkit and offer a variety of products. PGP sells an add-on security package for email," Bidzos said from RSA's Tokyo office, noting that PGP pays RSA encryption royalties, too.

PGP founder and pioneer Phil Zimmermann will get the title "fellow" at Network Associates, and PGP's product line will be integrated into Network Associates' suites. Larson said PGP has sustained heavy losses in revamping its product line but that new versions of PGP products will begin showing up next year.

The PGP acquisition was announced on the day McAfee's merger with networking firm Network General was completed. The new firm, Network Associates, will trade as NETA starting tomorrow.