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NetApp Buys Decru

Network Appliance Inc. (Nasdaq: NTAP) has made another bid to break its NAS-only mold. It will pay $272 million in cash and stock to acquire Decru Inc., a maker of storage security appliances. The deal, comprising about 80 percent stock and 20 percent cash, is set to close by October 2005 (see NetApp Acquires Decru for $272M).

NetApp execs say the move will help the company extend beyond NAS. It follows NetApp's purchase of Alacritus, a VTL and CDP vendor, for $11 million and its multivendor program with Veritas Software Corp. (Nasdaq: VRTS). (See NetApp Annexes Alacritus and Veritas, NetApp Ship Multivendor Products.) NetApp's strategy, execs say, is to be a provider not just of NAS, but of data management and data protection in heterogeneous storage networks that include NAS, SAN, iSCSI, and tape storage.

To get there, NetApp doesn't mind paying the relatively high pricetag to acquire the startup. "This is an expensive acquisition, but we think it's justified," said NetApp CEO Dan Warmenhoven on a conference call this morning. He said NetApp couldn't find a technology better than Decru's when it scouted the market. "We think they have at least a two-year headstart. We didn't see a clear number two."

Decru competes in the security appliance market with vendors like Kasten Chase Applied Research Ltd., NeoScale Systems Inc., and Vormetric Inc. Its DataFort devices encrypt data and add key management for data "at rest" behind firewalls. By doing this, Decru claims it can eliminate roughly 50 to 80 percent of all security threats, which come from inside an organization and aren't screened out by firewalls and other network security gear.

Decru has about 100 customers, most within the U.S. government. Decru has partnered with NetApp in the U.S. Department of Defense, and execs say it's grown from $6 million in revenue last year to a projected $35 million in revenue this year.

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