Telecommunications provider MCI Inc. announced yesterday that it is acquiring computer security firm Network Security Technologies Inc. for $105 million in cash.
The Herndon-based firm, more commonly called NetSec, was founded by two former National Security Agency employees. It manages computer security for major companies such as DaimlerChrysler AG and for government agencies such as the Justice Department.
With its purchase of NetSec, MCI is moving further from its long-distance business.
(Jay Mallin -- Bloomberg News)
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The deal marks the first acquisition by MCI since the former WorldCom emerged from bankruptcy reorganization last year. The Ashburn-based company said the advanced security systems offered by NetSec will help it appeal to large corporate clients and government customers.
"We want to make MCI's brand synonymous with security," said Jonathan C. Crane, MCI's executive vice president of strategy and corporate development.
Allan H. Carey, an analyst at research firm IDC, said the acquisition should prove valuable to MCI because today's business customers expect security as well as a speedy communications network.
"Customers want to know that they're not going to get hacked, that they're not going to have their e-mail conversations eavesdropped on," he said.
Like other long-distance carriers, MCI's consumer phone business has declined because of the proliferation of low-priced calling options. The company is working to transform itself as quickly as possible into a technology company that provides phone and Web services to business and government.
MCI lost $3.9 billion on revenue of $15.7 billion in the first nine months of last year. At NetSec, on the other hand, revenue doubled to $30 million in 2004, according to the privately held company, and executives said it is profitable.
Clients hire NetSec to design and then run their network security systems. For government agencies and major companies, such a system not only must keep out hackers but also control who has access to what information inside the network.
Glenn C. Hazard, NetSec chairman and chief executive, said demand for his company's services has grown as businesses work to meet requirements of the Sarbanes-Oxley Act, which dictates that companies must ensure their financial records are secure, and as government agencies work to meet standards of the Federal Information Security Management Act.
