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7/29/2003
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Secure Computing To Buy N2H2

The acquisition of the content-filtering vendor increases consolidation in an already-competitive market.

Network security products maker Secure Computing Inc. said Tuesday it is acquiring content-filtering vendor N2H2 for $20 million, furthering consolidation in an already-competitive market.

The all-stock deal is expected to boost Secure Computing in both the education and government markets, where N2H2 has shown particular strength, company executives said in a statement. They also noted that the purchase is expected to enlarge Secure Computing's customer base by more than 2,000.

The acquisition is expected to benefit Secure Computing's pursuit of customers for filtering products, the company said in a statement. The company has been strongest in the firewall and virtual private networks sectors, but has maintained a content filter-market presence with its SmartFilter and SmartFilterWhere line.

Ultimately, the deal is good for all parties, said N2H2's CFO Paul Quinn.

"Secure is already a solid No. 3 in content filtering," he said. "Combined with our technology, they become a very large player."

Additionally, the combination gives N2H2's technology a much higher profile in the enterprise marketplace, an arena targeted when former Microsoft executive Philip Welt became N2H2's CEO in 2001.

"We've always been strong in the education market," Quinn said. "This gives us a much stronger corporate presence."

Likewise, the deal will result in N2H2's technology spreading to new platforms. "Secure has applications we don't have," Quinn said, "including Cisco Content Engine and Blue Coat."

For its part, Secure Computing will acquire N2H2's experience with platforms including Cisco Pix firewalls, Novell Border Manager, and Volera content-manager.

"It's only to the good for a sales force to have a greater variety of platforms," Quinn said. "The combination of our platform strengths will make Secure a far more formidable competitor."

The deal will add to Secure's earnings in the first full quarter of consolidation, with additional benefits from cost savings and operating efficiencies, Secure Computing president and CEO Tim McGurran said in a statement.

Secure Computing, with $65.8 million in 2002 revenue, is putting up $19.9 million in stock to acquire N2H2. N2H2 generated $11.1 million in 2002 revenue.

The deal is subject to N2H2 approval and is expected to be completed by year's end.

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