Newsletter -- Week Ending March 12, 2004

InternetAcceleration News Summary
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Risky Business -- Last week's funding announcement of CipherTrust's $42M investment led by Battery Ventures and Greylock at first blush sounded like a solid mezzanine level investment for a company on the path to go public sometime next year. CipherTrust had a great year in 2003 reportedly having shipped over $30M of its e-mail security and spam prevention appliances. Greylock and Battery are top tier venture investors. It looks as if CipherTrust's stars are lining up. With one tiny exception -- just a week or so before the funding announcement, Microsoft's Bill Gates announced an enhancement to their Exchange product line -- Microsoft's Exchange Edge Services -- that provides a new set of capabilities aimed at protecting Exchange servers from spam and viruses as well as to increase performance (sounds like pretty much the same thing that CipherTrust has been doing).

The e-mail space is an interesting subculture in high technology markets. The two big gorillas, Microsoft and Lotus, dominate the space with huge revenues and huge development teams. For years, these giants sit back and watch e-mail submarkets evolve -- waiting to see how strongly customers care about new features and functions. Sometimes Microsoft will do nothing -- they never jumped onboard the "unified messaging" bandwagon and they didn't care about things like special purpose monitors or FAX gateways. These were small markets and Microsoft was content to let their partners do it. Other times they jumped in once they saw customer interest and a significant leverage opportunity -- as they've done with messaging directories, instant messaging, collaboration and mobile messaging. Once Microsoft moved into these areas the rules of the game changed. The early entrants that flourished before Microsoft's expansion had to find supporting roles if they were to survive.

And of course it all makes sense to Microsoft. If you're trying to grow a billion dollar business, you do it by making big plays in areas that have the potential for big paybacks.

CipherTrust's counter argument might be "we've got the lead" or "Microsoft won't get it right" or, worse yet, "Exchange isn't a big part of our business." Maybe. We've got a ringside seat for messaging's first big "battle of the century" and we're glad to see that CipherTrust has plenty of money in the bank. We're assuming that the new investors were able to use Microsoft's announcement to push down the valuation and improve their investment position. We'll see whether Battery and Greylock can drive this investment toward a positive liquidity event before the company has a full scale market war going on with Microsoft -- something that's sure to hurt valuations.

Branch Office Technology -- As we mentioned last week, on Monday we announced our newest report -- The 2004 Branch Office WAN Communications Technology Report. If you're counting, this is our fifth journey into technologies that are used to help improve application performance in corporate networks. The first was our 2001 report on Route Optimization. We followed that with in 2002 with a report on Application Acceleration. Then last year we did two reports -- one on the WAN compression market and the other was our Branch Office Market opportunity report. The remote office is perhaps one of the most interesting arenas for the evolution of IT and communications technology. There's a lot going on in this space. This new report will focus on the technologies that hold promise to gain customer acceptance in the branch over the next five years. For more information on this report -- www.netsedgeonline.com or send a note to john@netsedgeonline.com.

Two years old -- The toughest thing about getting older is the memory starts going. Someone asked us last week how long we've been doing this newsletter. The sad truth is that we don't actually remember when the first issue came out but we're fairly certain it was two years ago. Rather than trying to get the date right I've decided to do what my grandmother did with her children's birthdays -- since back then you registered births by going down to the county and filling out a birth certificate, she chose important holidays for each of her children's birthdays -- 4^th of July, New Years Day…so she could easily remember them. So we'll choose St. Patrick's day plus one -- March 18^th, 2002, as the first publication date. Thanks to you all for reading this (our list continues to grow) and thanks for not turning on your spam filters to block us.

Inbox -- E-mail conference event -- Our very own Peter Christy will moderate day one of the Security and Privacy track at the INBOX email conference coming to San Jose June 2^nd -- 4^th. www.inboxevent.com/2004/

One man's appliance is another's antique -- We touched base with two companies this week that used the same logic to reach entirely different conclusions. After several years of selling its sever side caching appliances, Warp Solutions has decided to eschew its hardware elements with the packaging of its next generation version of its SpiderCache Enterprise product as a software release. Feeling that its customers prefer the flexibility of a software load into an existing environment, Warp is betting on software as their key to the future.

Internap, on the other hand, is looking to appliance packaging as the key element in their product roadmap. After buying Sockeye and netVMG last year, Internap brought to market their Flow Control Platform appliance and has seen what they describe as great success in the first three months. After raising $57M through selling an additional 40 million shares in the market, Internap is aggressively pursuing an expansion program that goes beyond its traditional service provider business and into the network product/appliance space.

Funding News -- Seven infrastructure startups raised $129M last week.

Other financial news -- ProactiveNet announced record fourth quarter and fiscal year end results. Financial numbers were not provided. The company did report that fiscal 2003, ProactiveNet achieved year-over-year revenue growth of 56%, versus fiscal year end 2002. The company also announced it has completed its fourth consecutive quarter of growth. Sales increased by 22% in the fourth quarter of 2003, versus the same period in 2002.

In corporate news -- Microsoft joined the founding members of the industry anti-spam alliance, America Online, EarthLink and Yahoo! to file six separate lawsuits against top, serial spammers under the new federal anti-spam law - CAN-SPAM. The coalition was launched in April 2003. In other news, Expand Networks launched its ASEAN headquarters in Singapore, to service businesses in the region seeking to improve application performance and remote access over the WAN.

Acquisition News -- Cisco Systems, announced a definitive agreement to acquire Twingo Systems, provider of desktop security solutions for Secure Socket Layer (SSL) Virtual Private Networks (VPNs), reinforcing Cisco's Self Defending Network strategy. Watchfire Corporation acquired GomezPro, the benchmarking and website assessment services business unit of Gomez Inc. Akonix Systems, secure, managed and integrated multi-network enterprise instant messaging (IM) solutions, acquired Natural Messaging, developing and deploying interactive instant messaging applications for the enterprise.

Partnerships -- Peribit Networks and US Telecommunication announce major partnership for the Middle East. BorderWare Technologies expanded distribution of its MXtreme Mail Firewall appliance by announcing a distribution partnership with Firewall Systems Pty. Ltd., a Value-Added Distributor in Australia. Allot Communications, traffic management, announced an extension of its partnership with TVC Communications to provide traffic monitoring and management capabilities to Latin America's service providers and cable MSOs. KnowNow and Accius Systems Corp announced that Natsource LLC has deployed a KnowNow-enabled Web-based electronic whiteboard solution for real-time online collaboration between brokers. VASCO, enterprise-wide security products, and Netilla Networks, SSL VPN and Secure Application Access Management solutions, announced that their products would be marketed as a bundle by their common distributors.

In Product News -- Cisco is integrating security throughout the network, defense without inhibiting the access of legitimate users and, as a result, preserving the rich productivity advantages of Internet Protocol (IP)-based communications. The two key hardware announcements are the Cisco 7301 Series Router and the Cisco VPN 3020 Series Concentrator. Opsware, data center automation and utility computing software, announced Opsware Automation: Asset Tracking Edition. Previously known as Tangram's flagship product 'Asset Insight'. Tumbleweed Communications released Tumbleweed Personal Quarantine Manager which sends out a periodic HTML or text-based email to end users with a listing of all the email messages that have been blocked as suspected spam. To retrieve a blocked message, the end user merely clicks the "Release" button. Forum Systems, Web services security solutions, released the first Federal Information Assurance Gateway for government agencies that is DoD PKI certified.

Customer wins -- Curl Corporation, software to deliver Web-distributed enterprise applications, announced that Curl Asia Pacific Corporation, distributor in Japan and Korea, has won major accounts for Curl Client/Web Platform, including Nexus, Hitachi Displays and Daewoong Pharmaceutical. Internet Express is now offering high-quality, high-bandwidth Ethernet services to businesses throughout the Midwest using Actelis Networks MetaLIGHT Ethernet-over-Copper platforms. Equinix announced that more than 60 enterprises, content providers and network service providers have signed on to the company's Equinix Direct multi-network connectivity service. S.A. IPM, one of Belgium's leading media publishing companies, has deployed Redline Networks Web I/O processors to substantially increase performance on the Web sites of the country's two leading national newspapers. Coon Creek Telephone Company purchased and deployed SkyStream's Mediaplex-20 to offer video-over-DSL services as well as South Slope Cooperative Communications Company to complete its 'triple play' offering of voice, video and data using SkyStream's Mediaplex-20. The Economist Group's network edge to Internap, Internap will provide The Economist Group with Performance IP connectivity to Internap's Private Network Access Point (P-NAP) in London. Internap will provide Travelweb with high-performance managed Internet services for the company's website.

Executives on the move -- Permeo Technologies Inc., SSL VPN solutions,appointed Michael S. Bennett as Chief Executive Officer. Laurie Riedel chosen as chief financial officer at Authentica, enterprise digital rights management software. Loudeye Corp, digital media solutions, appointed Larry Madden as executive vice president and chief financial officer and Bill Fasig as executive vice president of business development, sales and marketing. Blue Coat named John Carosella vice president of business development. James Miller joins Trapeze Networks, wireless LAN company, as vice president of Americas sales. And, Apparent Networks, network intelligence software, appointed Dane Chauvel as chief financial officer, Matt Dion as vice president of marketing and Gordon Janzen, co-founder, as executive vice president of strategy and alliances.

See links below for the complete text of those items mentioned above plus other news.

The InternetAcceleration newsletter and www.internetacceleration.com are produced by NetsEdge Research Group. For more information or to keep us updated, contact John Katsaros john@netsedgeonline.com.

Product News

New Enhancements Further Cisco IOS as a Key Component for Self-Defending Network
Cisco is integrating security throughout the network, defense without inhibiting the access of legitimate users and, as a result, preserving the rich productivity advantages of Internet Protocol (IP)-based communications. The two key hardware announcements are the Cisco 7301 Series Router and the Cisco VPN 3020 Series Concentrator...more>

Opsware Introduces Automated Asset Discovery And Tracking, Furthering Lead In It Automation
Opsware, data center automation and utility computing software, announced Opsware Automation: Asset Tracking Edition. Previously known as Tangram's flagship product 'Asset Insight', the re-branding follows the closing of Opsware's acquisition of Tangram Enterprise Solutions...more>

Tumbleweed Announces Availability Of Anti-Spam Quarantine Manager To Eliminate False Positives
Tumbleweed Communications released Tumbleweed Personal Quarantine Manager which sends out a periodic HTML or text-based email to end users with a listing of all the email messages that have been blocked as suspected spam. To retrieve a blocked message, the end user merely clicks the "Release" button...more>

Forum Systems First Web Services Security Vendor Awarded Dept. of Defense Public Key Infrastructure (PKI) Certification
Forum Systems, Web services security solutions, released the first Federal Information Assurance Gateway for government agencies that is DoD PKI certified...more>

Corporate News

America Online, EarthLink, Microsoft and Yahoo! Team Up to File First Major Industry Lawsuits Under New Federal Anti-Spam Law
Microsoft joined the founding members of the industry anti-spam alliance, America Online, EarthLink and Yahoo! to file six separate lawsuits against top, serial spammers under the new federal anti-spam law - CAN-SPAM. The coalition was launched in April 2003...more>

Expand Networks Now Launches ASEAN Operations
Expand Networks launched its ASEAN headquarters in Singapore, to service businesses in the region seeking to improve application performance and remote access over the WAN...more>

Corporate News -- Agreements / Partnerships

Peribit Networks and US Telecommunication Announce Major Partnership for the Middle East
Under the terms of the agreement, US Telecommunication will develop Peribit's channel partner network, drive sales, co-ordinate regional training, and provide pre and after-sales support across the Middle East, as part of a coordinated effort to broaden the adoption of Peribit products...more>

BorderWare Partners with Firewall Systems to Expand Distribution of MXtreme Mail Firewall in Australia
BorderWare Technologies expanded distribution of its MXtreme Mail Firewall appliance by announcing a distribution partnership with Firewall Systems Pty. Ltd., a Value-Added Distributor in Australia...more>

Allot Communications Expands TVC Relationship to Latin American Cable Operators
Allot Communications, traffic management, announced an extension of its partnership with TVC Communications to provide traffic monitoring and management capabilities to Latin America's service providers and cable MSOs...more>

KnowNow and Accius Deliver Web-based Whiteboard Collaboration Platform to Natsource
KnowNow and Accius Systems Corp announced that Natsource LLC has deployed a KnowNow-enabled Web-based electronic whiteboard solution for real-time online collaboration between brokers...more>

VASCO and Netilla Announce Joint Product
VASCO, enterprise-wide security products, and Netilla Networks, SSL VPN and Secure Application Access Management solutions, announced that their products will be marketed as a bundle by their common distributors...more>

Corporate News -- Mergers / Acquisitions

Cisco Systems to Acquire Twingo Systems
Cisco Systems, announced a definitive agreement to acquire privately held Twingo Systems, provider of desktop security solutions for Secure Socket Layer (SSL) Virtual Private Networks (VPNs). This acquisition advances Cisco's leadership in providing secure connectivity solutions and reinforces Cisco's Self Defending Network strategy...more>

Watchfire Acquires GomezPro Scorecard and Website Assessment Business Unit
Watchfire Corporation acquired GomezPro, the benchmarking and website assessment services business unit of Gomez Inc...more>

Akonix Acquires Natural Messaging
Akonix Systems, secure, managed and integrated multi-network enterprise instant messaging (IM) solutions, acquired Natural Messaging, developing and deploying interactive instant messaging applications for the enterprise...more>

Corporate News -- Finance News

CipherTrust Completes $42 Million Round Of Venture Financing
CipherTrust, Inc., email security, completed a $42 million round of financing co-led by top-tier venture capital firms Greylock and Battery Ventures. The Series B round, which is the company's first institutional round of financing, also includes U.S. Venture Partners, Noro-Moseley Partners and Silicon Valley Bank...more>

World Wide Packets Completes $24.5 Million Round of Funding
World Wide Packets, Ethernet access networking solutions, announced a second close to its current round of funding, bringing the total new investment to approximately $24.5 million. The first close of the third round culminated in a total of $15.7 million. New investors Argo Global Capital and Entrepia Ventures participated in this over-subscribed second close of over $8.7 million...more>

Aperto Networks Raises $20 Million in Series D Funding
Aperto Networks, WiMAX-class broadband wireless access systems, announced a $20 million Series D financing round led by JK&B Capital with Canaan Partners, Alliance Ventures, Innovacom, Tyco Ventures, Labrador Ventures, and Satwik Ventures. This funding brings the company's total financial backing to $77 million...more>

ProQuent Systems Announces $14M in Venture Backing
ProQuent Systems, Inc., intelligent mobile data infrastructure, secured $14 million in Series D venture capital funding. Nokia Venture Partners and St. Paul Venture Capital lead the series...more>

Colubris Networks Secures $13 Million in Series C Funding
Colubris Networks, intelligent wireless LAN (WLAN) access equipment and management systems, secured $13 million in series C funding. The oversubscribed round was led by GrandBanks Capital, with Mid-Atlantic Venture Funds and Prism Venture Partners and the Development Bank of Canada. Total investment in the company to date is $21 million...more>

Actona Technologies Attracts $10 Million in Series C Funding
Actona Technologies, wide area file services solutions for enterprise storage networks, has attracted $10 million in Series C funding, bringing its total equity investment to $23 million. This most recent round of funding was led by Mayfield and included participation from current investors Sequoia Capital, Evergreen Partners, and the Fantine Group...more>

NeoPath Networks Locks Up $6M Equity Financing
NeoPath Networks closed a $6M round of financing co-led by August Capital and DCM-Doll Capital Management. Also participating in the round were DotEdu Ventures and Bill Joy through HighBAR Ventures...more>

ProactiveNet Announces Record Fourth Quarter and Fiscal Year End Results
In fiscal 2003, ProactiveNet achieved year-over-year revenue growth of 56%, versus fiscal year end 2002. The company also announced it has completed its fourth consecutive quarter of growth. Sales increased by 22% in the fourth quarter of 2003, versus the same period in 2002; by 210% in the third quarter of 2003, versus the same period in 2002; by 34% in the second quarter of 2003, versus the same period in 2002, and by 24% in the first quarter of 2003, versus the same period in 2002...more>

Corporate News -- Executives on the Move

Permeo Technologies Inc., SSL VPN solutions, appointed Michael S. Bennett as Chief Executive Officer...more>

Laurie Riedel chosen as chief financial officer at Authentica, enterprise digital rights management software...more>

Loudeye Corp, digital media solutions, appointed Larry Madden as executive vice president and chief financial officer and Bill Fasig as executive vice president of business development, sales and marketing...more>

Blue Coat named John Carosella vice president of business development...more>

James Miller joins Trapeze Networks, wireless LAN company, as vice president of Americas sales...more>

Apparent Networks, network intelligence software, appointed Dane Chauvel as chief financial officer, Matt Dion as vice president of marketing and Gordon Janzen, co-founder, as executive vice president of strategy and alliances...more>

Customer Announcements

Curl Corporation Experiences Significant Growth in Asia
Curl Corporation, software to deliver Web-distributed enterprise applications, announced that Curl Asia Pacific Corporation, distributor in Japan and Korea, has won major accounts for Curl Client/Web Platform, including Nexus, Hitachi Displays and Daewoong Pharmaceutical...more>

Internet Express Selects Actelis Networks MetaLIGHT Platform to Deliver High-Quality, Cost-Effective Ethernet Services
Internet Express is now offering high-quality, high-bandwidth Ethernet services to businesses throughout the Midwest using Actelis Networks MetaLIGHT Ethernet-over-Copper platforms...more>

Equinix Direct Multi-Network Connectivity Service Grows to More Than 60 Customers
Equinix announced that more than 60 enterprises, content providers and network service providers have signed on to the company's Equinix Direct multi-network connectivity service...more>

Peribit Networks and US Telecommunication Announce Major Partnership for the Middle East
Under the terms of the agreement, US Telecommunication will develop Peribit's channel partner network, drive sales, co-ordinate regional training, and provide pre and after-sales support across the Middle East, as part of a coordinated effort to broaden the adoption of Peribit products...more>

Belgium's Leading Newspapers Use Redline Networks Appliances to Boost Web Site Performance
S.A. IPM, one of Belgium's leading media publishing companies, has deployed Redline Networks Web I/O processors to substantially increase performance on the Web sites of the country's two leading national newspapers...more>

Coon Creek Telephone Company Chooses SkyStream for Video Services Roll Out
Coon Creek Telephone Company has purchased and deployed SkyStream's Mediaplex-20 to offer video-over-DSL services...more>

Iowa's Largest Independent Telephone Company Delivers Digital Video Services with SkyStream's Mediaplex
South Slope Cooperative Communications Company purchased and deployed SkyStream's Mediaplex-20 to complete its 'triple play' offering of voice, video and data...more>

The Economist Group Entrusts Internet Connectivity to Internap
In a deal that effectively entrusts The Economist Group's network edge to Internap, Internap will provide The Economist Group with Performance IP connectivity to Internap's Private Network Access Point (P-NAP) in London...more>

Travelweb Selects Internap to Deliver High-Speed Connectivity for its Online Distribution Network
Internap will provide Travelweb with high-performance managed Internet services for the company's website...more>

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