http://www.newsbytes.com/news/02/174376.html By Nicholas Johnston, Washington Post CENTREVILLE, VIRGINIA, U.S.A., 11 Feb 2002, 6:07 AM CST The end is near for struggling Centreville, Va. data-security firm Para-Protect Services Inc., which plans to sell its customer contracts today to competitor Riptech Inc. Terms of the deal, which covers about 50 customers, involve an upfront payment by Riptech and some revenue sharing between the companies, although neither firm would disclose any specific figures related to the transaction. "They were concerned that their clients are taken care of," said Elad Yoran, Riptech co-founder and executive vice president. "They don't want to wind down the business and leave people exposed and unprotected." The sale of Para-Protect's customer contracts all but completes the closing of the four-year-old firm after the departure of its founders late last year and a decision by investors to shutter the company. Para-Protect raised more than $11 million in venture backing from a group of local investors, including Novak Biddle Venture Partners, Mid-Atlantic Venture Funds, Winston Partners and Riggs Capital Partners. Investors in Para-Protect did not return calls seeking comment. With the completion of this sale, Para-Protect should be shut down within the next 60 days according to Joe Ragan, the firm's chief financial officer. This is Riptech's third customer acquisition in the past year as the security industry goes through a wave of consolidations. Last July, Riptech bought the customers of California-based OneSecure Inc. when that company went through a reorganization. In December, Riptech picked up more than 100 customers from Predictive Systems Inc. A recent study by the Gartner Group, a research firm, reported that the managed-security business, which Riptech and Para-Protect are part of, is in the midst of a series of consolidations that should last throughout this year. The crowded marketplace is being winnowed to a smaller group of larger players better suited to meet the needs of corporate clients. Locally, that trend played out last month when TruSecure Corp. of Herndon, Va. bought Three Pillars Inc., a network-security monitoring firm. "Providing managed-security services is a much more challenging proposition than most people and even most security companies realize," Yoran said. The challenge facing these companies, he said, is building up a large enough customer base to cover the considerable overhead costs of operating facilities security firms build to monitor the networks of their customers. Riptech has two such centers; both are in Northern Virginia. The company has 150 employees. "Building an operations center and maintaining an operations center is not a trivial business," Yoran said. "It's quite expensive." With today's acquisition, Riptech's customers total "several hundred," Yoran said, and he expects the company to become profitable sometime this year. So far, Riptech has raised more than $40 million in venture capital backing from investors including Alexandria-based Columbia Capital, Providence Equity Partners Inc. and Broadview Capital Partners. The firm's latest round also included a $2.75 million line of credit from Comerica Inc. "We don't expect to need to raise an additional round of outside financing in order to become profitable," Yoran said. - ISN is currently hosted by Attrition.org To unsubscribe email majordomoat_private with 'unsubscribe isn' in the BODY of the mail.
This archive was generated by hypermail 2b30 : Tue Feb 12 2002 - 04:46:13 PST