Security Specialist PentaSafe Acquired by NetIQ

by Alex Woodie

NetIQ, a big player in the market for software that helps manage Microsoft Windows server environments, announced Monday that it plans to purchase PentaSafe Security Technologies, a Houston, Texas, company that sells security software for a variety of operating systems and applications. The acquisition, expected to close in December, should bolster NetIQ's expertise and product line at a time when effectively managing an enterprise computer system and securing it are coming to mean the same thing.

The deal still must be approved by PentaSafe shareholders, but that should prove to be a simple formality. This announcement has been a long time coming for PentaSafe, which has its roots in the OS/400 security software market, where it is still one of the strongest players, especially for system auditing tools. In March 2000, during the dot-com gold rush, the company embarked on an aggressive campaign to build on its success in the OS/400 market and develop a comprehensive suite of cross-platform security tools that would work on Windows and Unix systems and applications, as well those running on OS/400 iron. At the time, security was nowhere near as important a topic as it is today, and the company's chief executive, former BMC Software vice president Douglas Erwin, hoped be the first to market with a collection of integrated, cross-platform security tools, and to make a killing with an initial public offering of stock. That IPO never happened, but the company's development strategy continued unabated, and today the company has the fourth-largest installed base of intrusion-detection software of any security vendor, according to IDC.

For NetIQ, the acquisition of PentaSafe's VigilEnt suite of integrated tools will help it to consolidate its own security management products and should bolster its presence against larger security management vendors, including IBM Tivoli, Computer Associates, BMC, and others. There is some overlap between the two companies' products, including firewall reporting, vulnerability assessments, security administration, and security event management capabilities. This will likely result in the companies consolidating several products, according to company presentations, including merging the NetIQ Security Analyzer with the VigilEnt Security Manager; merging the NetIQ Administration and Migration suites with the VigilEnt User Manager product, and merging the NetIQ Firewall & Security Reporting and Security Manager with the VigilEnt Intrusion Manager. The PentaSafe asset that NetIQ coveted the most was probably the VigilEnt Policy Manager, the fourth and final core component of PentaSafe's four-pronged security vision, which simplifies creating, implementing, and enforcing security policies at an organization. NetIQ also acquires additional password-management capabilities and vulnerability-assessment capabilities for OS/400 and mainframe operating systems, which PentaSafe has considerable expertise in.

NetIQ will establish a second headquarters for its new security division at PentaSafe headquarters in Houston. Meanwhile, NetIQ will continue to operate out of its global headquarters in San Jose, California. Erwin, who owns a good percentage of PentaSafe's stock, will continue to lead his team in Houston and will be given a seat on NetIQ's board of directors. NetIQ, which expects to have revenues of about $75 million for its most recent quarter, agreed to pay about $192 million in cash for PentaSafe and enough of its stock, which is traded on Nasdaq, to bring the total value of the transaction to about $255 million, based on the value of NetIQ's stock when the market closed Monday.

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