A Symantec spokesperson confirmed the companies are talking and said the deal would give Symantec better control of the product and better margins. She said Symantec did not announce the deal as the price is not financially material.

If the deal closes, likely in the second quarter, Symantec would get a staff of about 30 in Miami, and Nexland’s own-brand firewall/VPN products. Nexland CEO Gregory Levine said the details of staffing and products post-acquisition have not been finalized yet.

Levine said that over 50% of revenue in its last quarter came from the Symantec OEM deal, adding: We’re not really a sales company, we’re more an engineering company.

Symantec CEO John Thompson said in September he had no more acquisition plans.

Symantec saw 49% year-on-year growth in firewall/VPN sales in the quarter to December 31, and said it is seeking growth in its enterprise businesses.

One of Nexland’s key pieces of intellectual property Symantec will get is a patent, granted in Taiwan and pending in over a dozen other countries including the US, that allows multiple IPSec VPN tunnels to pass through NAT devices.

NAT, for Network Address Translation, masks the IP addresses of computers on a LAN from the external network. This has benefits, but it makes it hard for VPN traffic to find the correct destination address when multiple VPN users are on the same NAT device.

For a company with not much cash, we spent a lot of money filing that patent, we feel it’s a very valuable piece of technology, Levine said. I can’t speak for Symantec but I’m sure it had something to do with their decision.

A common way to solve the NAT problem in many market-leading firewalls is by encapsulating IPSec within UDP. But Levine said these workarounds are not as elegant or as fast as Nexland’s technology.

There are good financial reasons for Nexland wanting to be acquired. Its September 30 balance sheet showed $84,375 in cash but over $1m in accounts payable. However, in its last reported quarter the company was profitable and cash flow positive.

Nexland reported net income of $577,249 on revenue up 330% at $3.2m for the three months to September 30 2002. The company is listed on the Over The Counter Bulletin Board.

Source: Computerwire