What remains of NetOctave, which raised more than $23 million in venture capital over the past three years, is being absorbed by CyberGuard Corporation of Florida.
The deal includes jobs for most of NetOctave’s remaining employees as well as rights to its top two product lines.
The sale price was $1.5 million in cash and stock.
NetOctave focuses on network and Internet security products.
The company had raised venture capital from several high-profile investors, including Intersouth Partners, Intel Capital, Kitty Hawk Capital, MCNC, North Carolina Enterprise Fund and Wakfield Capital.
CyberGuard announced the acquisition this morning, and details were confirmed by Matt Karash, director of marketing for NetOctave. Karash is one of 12 NetOctave employees who will join Cyberguard. Company co-founders David Blaker, the chief technology officer, and Jim Kristof, director of software development, also will join CyberGuard along with the development team, engineering and sales and marketing groups, Karash said.
Rick Hegberg, NetOctave’s president and chief executive officer, won’t join CyberGuard, said Pat Clawson, president of Cyberguard.
The CyberGuard announcement said the deal covered “certain assets”, including “new technology, engineering talent and a customer base.” A company spokesperson confirmed that some NetOctave employees would be hired by CyberGuard as part of the deal.
“Absolutely, they are a part of the company,” the spokesperson explained. “They are one of the reasons the company was so attractive to us. The bring us expertise that we don’t have.”
Clawson said the NetOctave staff was a priority. “They are an incredibly talented group of eningeers,” he explained. CyberGuard also focuses on hardware, NetOctave on hardware, Clawson added. “This enables us to expand our offerings.” He added that tne NetOctave staff would be helpful in designing new products.
Cyberguard (AMEX: CFW) is based in Fort Lauderdale.
Karash said that the NetOctave group would remain in the Triangle area and is in the process of relocating to different office space in Morrisville.
The sale is the second involving NetOctave assets and employees in four months. In September, NetOctave sold its storage network development unit located in Framingham, MA to Hifn, a California-based company. Terms were not disclosed.
Following the sale, NetOctave focused on two products — security processors and accelerator boards for the SSL (secure sockets layer) and IPSec (Internet protocol security).
NetOctave also laid off a number of employees and stopped development of another security tool last June.
According to Karash, NetOctave had been exploring a variety of options — such as selling out, merging or raising more money — since “the fall timeframe.” The CyberGuard deal “made the most financial sense,” he said. “Given the state of the (telecommunications) industry, this is a good ending.”
Clawson said the deal was a “fair price, or the deal wouldn’t have been done.”
NetOctave continues to manufacture its security products and has a customer base. Among its clients was CyberGuard.
“That’s how we became aware of the company,” the CyberGuard spokesperson said. “We were using another product, and NetOctave’s product did the same thing four times faster.”
NetOctave was spun out of security firm Celotek in 2000.