Network Appliance Inc. said this morning it will acquire storage security vendor Decru for approximately $272 million in cash and stock.

Decru, particularly strong in government markets, uses a combination of strong encryption, authentication, access controls, and compartmentalization in its DataFort appliances to secure stored data.

The two companies have operated as partners since January 2004; earlier this month NetApp said it would integrate Decru payment modules for the financial services industry into NetApp compliance management products.

And while the two companies have worked together on integrated offerings, NetApp was also quick to point out that Decru's products work with a variety of storage area network, iSCSI and direct attached storage vendors, even with other vendors in the network attached storage market where NetApp dominates. "NetApp continues to expand its ability to front-end multivendor, heterogeneous storage systems from various third-party vendors in the storage arena," the company said in a statement.

The deal, expected to close by October, is NetApp's biggest this year. It acquired virtual tape vendor Alacritus in April for $11 million.

One analyst applauded the timeliness of the acquisition. "Given the string of high-profile data loss headlines--Choicepoint, MCI, Bank of America--we believe this area is increasingly important to end customers," said Daniel Renouard of Robert W. Baird & Co., New York. Adding that the deal is an "expensive" acquisition, Renouard nonetheless cited Decru as "an early leader in a potentially large segment of the market."

Just up the street from NetApp's headquarters, Redwood City, Calif.-based Decru was founded in 2001 and has about 45 employees. It's been the beneficiary of $45 million in venture funding from Benchmark Capital, Greylock and others. Decru's stock in trade is providing wire-speed encryption to data "at rest," that is, behind the firewall and typically on a server or archive. After the acquisition, Decru will form a new business unit within NetApp, which said it expects easy integration with NetApp's own NearStore and SnapSuite lines of data protection products.