Avaya agrees to acquire VPNet Technologies

Avaya Inc. today announced it has agreed to acquire VPNet Technologies, Inc., a privately held developer of virtual private network (VPN) solutions and devices for approximately $120 million in cash. The acquisition broadens Avaya`s presence in the rapidly growing market for data networking solutions for enterprise customers.

Based in Milpitas, California and founded in 1995, VPNet Technologies develops and markets high-performance VPN solutions to service providers and enterprises. The company`s scaleable VPNwareSystems deliver the highest levels of security, performance and manageability across a wide range of VPN applications. Its VPNsure(SM) Managed Services Program enables service providers and enterprises to outsource the implementation and management of their VPNs. The VPNet products will complement Avaya`s current offerings, giving customers a wider choice of VPN solutions. Avaya`s portfolio of data solutions 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 addition of VPNet strengthens our capabilities in data networking," said Don Peterson, president and CEO, Avaya. "VPNet`s products and services help customers take full advantage of the benefits from VPNs of security, productivity and cost-effectiveness." The VPN equipment market is expected to grow by a CAGR (compound annual growth rate) of 40 percent to $4.3 billion from 1999 through 2003, according to industry sources.

With a VPN, an enterprise can use the public network - including the Internet - 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. VPNs offer the security associated with a private network combined with cost savings and the speed of deployment associated with the public network.

VPNet has shipped more than 3,000 of its VPNwareTM Systems to customers in 25 countries since the product was introduced in 1997. VPNet sells primarily through value-added resellers, distributors, systems integrators and service providers. Among the companies with which it works to deliver VPNs and VPN services are IBM Global Services, SBC Communications, Equant Integration Services, AT&T, CERFnet, NTT PC and XO Communications.

"VPNet`s exclusive focus on VPNs for enterprises has allowed us to become a leader in this fast-growing market," said James E. Patty, president and CEO, VPNet Technologies. "We`re excited to become part of Avaya and offer its large base of enterprise customers a total VPN-managed solution, whether it is for remote access, communications within an organization or communications with other business partners. Like Avaya, VPNet offers customers the option of managing their communications themselves or through our full-service outsourcing capabilities." Patty will join Avaya as vice president, virtual private networking.

VPNet employs about 130 people, most of whom work in Milpitas. The company also has offices in Taipei, Taiwan and Fleet, Hampshire in the United Kingdom. More than a third of its employees are involved in research and development.

The completion of the acquisition is subject to regulatory approval and customary closing conditions and is expected to close in the quarter ending March 31, 2001. Excluding in-process research and development (IPR&D) and the amortization of goodwill, the acquisition is expected to have a $0.03 dilution to Avaya`s cash earnings in fiscal 2001. Including the amortization of goodwill and IPR&D, the acquisition is expected to have a higher dilutive impact.