Northern Telecom has spun off its security products business into a new company called Entrust Technologies.
The unit, which Nortel values at $90-100 million, will take over the work previously done by the Canadian company's Secure Networks division. This focuses on encryption and digital signature software for securing information on the Internet. Nortel still holds a majority stake in Entrust, while $26 million worth of its stock is owned by a group of institutional investors headed by Olympus Partners.
The motives for the spin-off are both financial and market-driven. Peter Currie, chief financial officer of Nortel, said the move would "increase the return on investment to Nortel and our shareholders". But Nortel's directors also claim a tightly focused and flexible organisation is required to compete in the fast-changing security market. "We must foster the entrepreneurial spirit and vigour so characteristic of this market," added Currie.
Entrust will be headed up during the transition period by John Ryan, currently vice president for the multimedia and Internet solutions operations. Brian O'Higgins will be chief technology officer and Paul Van Oorschot chief security architect. The unit will be headquartered in Ottawa in Canada.
"The security market, and in particular the market for public key cryptography, is growing rapidly as a result of corporate use of the Internet and Intranets," commented Ryan.
Nortel Secure Networks was set up in 1993. Its chief products are Entrust, Entrust/Lite and Entrust/Web CA, all covering encryption, digital signatures and automated key management. They are mainly installed in the government, financial and hi-tech industries.
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