Netilla & AEP: Hands Across the Ocean

Even as 2004 rumbles to a close, the M&A deals are still coming thick and fast, as Irish IPSec specialist AEP Systems Inc. yesterday joined forces with New Jersey-based SSL VPN vendor Netilla Networks Inc., a deal boosted by a $5 million injection of capital (see AEP and Netilla Merge, Raise $5M).

AEP Systems CEO Pat Donnellan will assume the same role in the new company, AEP Networks. Netillas CEO, Reggie Best, will become AEP Networks’ executive vice president of marketing.

Best told NDCF that the companies will have a combined workforce of around 55 people, with key offices in Somerset, N.J., in the U.K., and in Ireland. The firms will sell their products into a combined base of 1,200 users, he adds.

The exec believes users are clamoring for technologies that enable site-to-site connectivity with Web-based access for users -- hence the combination of IPSec and SSL VPN.

Is there really a demand for this type of thing? Jon Oltsik, senior analyst at The Enterprise Strategy Group Inc. certainly thinks so. “It’s kind of the direction where things are going,” he says. “It helps AEP and Netilla move toward having a one-stop shop.”This is important, according to Oltsik, because users are sick of dealing with a wide range of vendors. “Everyone is looking for fewer vendors and this lets AEP and Netilla sell more [products] at one time."

But it’s a tough market out there, and the newly merged firm will be coming up against the likes of Aventail Corp., F5 Networks Inc. (Nasdaq: FFIV), Juniper Networks Inc. (Nasdaq: JNPR),

SafeNet Inc. (Nasdaq: SFNT), and Thales SA (Paris: HO).

Undeterred by all this competition, Best predicts the new company will be profitable sometime next year. He also tells NDCF that AEP Networks, like Netilla, will conduct most of its business through the channel. “It saves us money and it allows us and our channel partners to provide local sales and support to our customers,” he says.

The $5 million funding round involved prior investors in both companies, including AEP Systems’ lead investor ACT Venture Capital and Netilla’s lead investor Ascend Venture Group. Other firms participating include Early Stage Enterprises, Masthead Venture Partners Corp., Mid-Atlantic Venture Funds, and NJTC Venture Fund.

Prior to this funding round, Netilla had raised about $20 million since its launch in 1999. AEP Systems, which was founded a year earlier, had secured a similar amount.The additional $5 million will go to the usual stuff: "marketing, sales activities and supporting our channel partners,” says Best. However, he adds, the new firm will not be unveiling its in-depth product roadmap and long-term strategy until some time in the first quarter of 2005.

— James Rogers, Site Editor, Next-Gen Data Center Forum