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SonicWALL Acquires Phobos for $268 Million

Internet security solution provider SonicWALL Inc. Tuesday laid $268 million in cash and stock on the table in a bid for Internet security infrastructure manufacturer Phobos Corp.

Under the terms of the agreement, SonicWALL will exchange 12.2 million shares and options of SonicWALL common stock (based on the company's Oct. 16 closing price of $17.88 per share) and $50 million in cash for all outstanding shares, options and warrants of Phobos. SonicWALL said $20 million of the $50 million in cash is contingent on Phobos meeting certain revenue targets in 2001. SonicWALL anticipates completing the transaction by the end of the year and intends to account for the transaction under the purchase accounting method.

"The market for distributed security solutions is growing rapidly as people realize the importance of protecting their network from internal security threats," said Sreekanth Ravi, president and chief executive officer of SonicWALL. "With the combination of SonicWALL's and Phobos' people and technologies, we are uniquely positioned to enter this market and establish a leadership position."

SonicWALL is looking to add speed with the acquisition of Salt Lake City-based Phobos. Phobos designs and manufactures SSL products which offload encryption/decryption processing from secure servers. SSL -- or Secure Sockets Layer -- is a protocol developed by Netscape for transmitting private documents. It uses a private key to encrypt data which is then transferred over the SSL connection. By convention an SSL connection starts with https: rather than http:.

In a joint statement, the companies said this can mean as much as a 50-fold increase in the number of transactions an e-commerce site can handle. Phobos also offers load balancing products. SonicWALL said the combination of its secure access products and value-added security services and Phobos' secure transaction products will give the combined company's security solutions a breadth and depth that will appeal to small and medium business customers and large enterprises alike.

"Phobos' expertise in SSL offloading and secure transaction management complements SonicWALL's award-winning Internet security appliances," said Ron Heinz, president and chief executive officer of Phobos. "The technology, sales and marketing synergies between Phobos and SonicWALL will accelerate our entry into enterprise, service provider and e-commerce markets."