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NetApp locks down Decru for $272M

NetApp will acquire storage encryption startup Decru for $272M, stepping up its ability to secure customer data at rest.

Network Appliance Inc. (NetApp) plans to acquire storage encryption startup Decru Inc. for approximately $272 million in cash and stock, reflecting the increasing role security is playing in storage.

The deal comes in the wake of many high-profile security breaches and government regulations that are driving organizations to implement better security.

"Network Appliance realizes that owning the bits means securing the bits," said Jon Oltsik, senior analyst at Enterprise Strategy Group. "This is a really immature market but has the potential to be huge."

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Decru's DataFort appliances protect storage by inserting a layer of encryption, authentication, access controls and compartmentalization at the disk and tape level. Unlike firewalls and network security products, which protect the network perimeter and "data in motion," Decru appliances protect "data at rest" behind the firewall.

Decru has about a hundred customers and expects revenues in the region of $6 million this year. NetApp projects this will increase to $35 million in 2006. "They were far ahead of the competition in their penetration of the customer base," said Suresh Vasudevan, senior vice president of product management. at NetApp.

NetApp maintains that Decru's technology is also superior to other companies selling similar storage encryption products, including NeoScale Systems Inc., Kasten Chase Applied Research Ltd. and Vormetric Inc. "They support NAS, SAN and iSCSI storage, crypto-shredding and enterprise-wide key management," Vasudevan said. He added that Decru is the only storage encryption startup to have 5015.2 and federal information processing standard certifications, both critical for federal government agencies managing classified data.

Over the last year, NetApp and Decru have developed combined offerings, most recently for the credit card industry. On June 7, the companies jointly announced an integrated offering for secure processing and storage of credit card data in compliance with Visa and Mastercard Payment Card Industry security standards.

As far as integration goes, NetApp plans to keep Decru as a separate business unit for the time being. Vasudevan admits that NetApp must reconcile how to bring together Decru's encryption technology with the idea of classifying, searching and providing data de-duplication capabilities, all on NetApp's road map.

"Encryption makes it impossible to go through and index and de-duplicate data, the longer term question is how to combine these," he said.

The acquisition adds to NetApp's data protection portfolio, which includes its NearStore disk-based backup appliance; SnapSuite software for data replication, mirroring, and restoration; NetCache appliance for protection from Internet viruses and attacks; and LockVault, which provides write once, read many capabilities for safeguarding regulated data.

Decru was founded in 2001 and has raised around $45 million in venture financing from Benchmark Capital, Greylock, New Enterprise Associates, In-Q-Tel and others. The acquisition is expected to close by October 2005, subject to customary closing conditions.

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