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Avaya Bags VPNet Technologies

Enterprise communication provider Avaya Inc. made its first acquisition Monday by grabbing privately-held VPNet Technologies Inc. for $120 million in cash.

The Lucent spinoff, which went public in October, bought the Milpitas, Calif.-based virtual private network specialist to bolster its data networking capabilities. Avaya hopes VPNet's products will complement its current offerings, giving customers a broader VPN suite from which to choose.

VPNet has shipped more than 3,000 of its flagship VPNware systems to customers in 25 countries since the product was introduced in 1997. VPNet has partnered with such heavyweights as IBM Global Services, SBC Communications Inc. and AT&T Corp to deliver VPNs and VPN solutions.

Don Peterson, president and chief executive officer at Avaya, talked about the impact of the play in a company statement.

"VPNet's products and services help customers take full advantage of the benefits from VPNs of security, productivity and cost-effectiveness," said Peterson.

The VPN equipment market is expected to grow by a compound annual rate of 40 percent to $4.3 billion from 1999 through 2003, according to industry analysts.

A tool of varying worth depending on the needs of a corporation, a VPN allows an enterprise to use the public network to make its communications network more flexible and cost-effective for voice and data communications with its branch offices and virtual office and mobile employees.

As a result of the acquisition, Avaya will welcome 130 employees to its fold, with VPNet President and CEO James E. Patty joining as vice president of virtual private networking.

Avaya's portfolio currently includes silicon-based gigabit ethernet local area network switches and routers, wireless local area network solutions, multi-service wide area network switches, security systems for enterprises and policy management systems.

The $7.4-billion-dollar company, formerly the Enterprise Networks Group at Lucent, was spun out of Lucent last year so that the telecommunications gear maker could focus on high-end networking and wireless products for communications carriers and Internet service providers.