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AuthenTec Buys Into Embedded Security With SafeNet Division Acquisition

AuthenTec : 01 March, 2010  (Company News)
Biometric supplier expands its scope by acquiring embedded security solutions division from SafeNet for end user protection and data encryption
AuthenTec has acquired SafeNet's Embedded Security Solutions Division in a cash and stock transaction which further strengthens AuthenTec's offering of security and identity management solutions.


SafeNet's Embedded Security Solutions products are used in hundreds of millions of communication and network products to ensure data privacy for businesses and individuals, and are sold to a variety of brand name customers including HP, Samsung, LG, Ericsson, AMD, Cisco, Alcatel-Lucent, Juniper Networks, Nokia-Siemens and Texas Instruments among others. SafeNet's Embedded Security Solutions recorded embedded IP and software revenues of $15.5 million in 2009 with gross margins exceeding 90 percent and operating income margins of over 20 percent (the unaudited results of the business are subject to adjustment during the audit process). AuthenTec will also become the exclusive worldwide supplier of SafeNet's SafeXcel security processor ICs, representing over $3 million in incremental sales in 2009. The deal is expected to be accretive to AuthenTec's non-GAAP earnings in 2010, after consideration of the Division's deferred revenue.

Under terms of the transaction, AuthenTec paid $8.5 million in cash and issued 1.2 million shares (valued at $2.8 million at the closing) of its common stock. The transaction also calls for an earn-out of up to $2.5 million in cash based on the attainment of certain revenue goals for the remainder of 2010.

"This acquisition continues our transformation from a component supplier to a more comprehensive source of security, identity management and touch control solutions. The addition of SafeNet's Embedded Security Solutions not only significantly strengthens our offerings in our existing markets, but also broadens our revenue base," said AuthenTec CEO Scott Moody. "By making use of the expertise of the SafeNet engineering team in software development, network security and secure communication, AuthenTec will have the ability to offer secure end-to-end solutions, from the individual PC or cell phone all the way to the network server in the cloud. This acquisition also helps drive additional revenue growth while improving gross margin and accelerating our return to profitability."

Commenting on the acquisition, SafeNet CEO Mark Floyd stated, "This transaction offers compelling value to SafeNet's existing embedded customers, allowing them the opportunity to extend a secure environment for managing data security needs beyond the server and network, and directly to the end-user on either a PC or mobile device. We are extremely pleased that an industry leader such as AuthenTec will continue to build on the success of our Embedded Security Solutions team, and we look forward to working closely with AuthenTec as a strategic supplier."

AuthenTec will benefit from the addition of SafeNet's highly qualified Embedded Security Solutions staff of encryption, algorithm, software and silicon design engineers and its expansive portfolio of software, IP and hardware products. These include SafeXcel IP Cores (ie, protocol aware inline security processing, security packet processing, encryption, authentication/hashing, public key acceleration, true random number generation, etc.), QuickSec Embedded Security toolkits, Mobile VPN and Digital Rights Management (DRM) Fusion Solutions. It also includes the Division's 23 US patents as well as additional foreign patents, bringing AuthenTec's US portfolio to 144 issued and pending patents.

AuthenTec will also add SafeNet's highly regarded security and encryption IP content and expertise, which aligns with AuthenTec's longer term strategy to generate its own IP licensing revenue. These IP cores will also reduce the Company's planned licensed IP expenses.

The Embedded Security Solutions' team will continue to operate from engineering locations in the Netherlands and Finland, while also strengthening AuthenTec's existing sales and support locations in Japan, Korea, Taiwan, the US, and Europe. Commenting on the transaction, former SafeNet Managing Director Dr. Simon Blake-Wilson, now AuthenTec Vice President of Embedded Security Solutions said, "In discussions last year we realized the power of combining the world class security technologies of SafeNet with the leading edge biometric products being introduced by AuthenTec. Our global team is energized and eager to pursue the unique opportunities that AuthenTec's strong combination of biometrics and encryption will enable."
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