Santa Clara, Calif. - Bay Networks, Inc. last week leapt into the virtual private network (VPN) arena with both feet by announcing plans to acquire start-up New Oak Communications, Inc. for $156 million in stock and cash.
Bay sought New Oak's flagship NOC 4000 Extranet Access Switch, which packs firewall, authentication and LAN switching in one box. With the NOC 4000 Bay can rapidly offer users VPN services and enter the lucrative extranet services market.
VPNs and extranets can save companies $1,000 per employee per year in long-distance and other telecommunications expenses, Bay claimed.
The worldwide market for VPN and extranet equipment is expected to surpass $1 billion by 2000, according to research firms Forrester Research, inCambridge, Mass., and Infonetics Research, in San Jose, Calif.
These firms project VPN and extranet service-related revenue to exceed $10 billion in the same time period.
"The rapid growth of [VPN] markets is fueled by huge cost savings to be had by [using] the public data network," said Bay Chairman, President and CEO David House. "This is the way of the Internet today."
New Oak's NOC 4000 sits at the corporate site and takes in up to six T-1 WAN lines or a single T-3 from the Internet, and connects with an Ethernet LAN.
The NOC 4000 authenticates each user, opens up its firewall, establishes a secure IP tunnel and grants LAN access privileges based on individual user profiles stored in Lightweight Directory Access Protocol directories.
The NOC 4000 will ship in the second quarter.
Bay said the device can be fed by the company's existing remote access offerings, such as the 5399 remote access concentrator and the MX 200 and MX 50 ATM access concentrators, which are based on Yurie Systems, Inc.'s LDR 200 and LDR 50. Bay officials said the company will continue to offer the Yurie-based products.
"[New Oak] really has defined this market," House said. "This gives Bay a significant time-to-market advantage over our competitors," which include Ascend Communications Corp., Cisco Systems, Inc., 3Com Corp. and Cabletron Systems, Inc.
"None of the players really have something similar to this, because it's a new class of product," said Craig Johnson of Dataquest, Inc., in San Jose, Calif. "They can bolt together their [products] to get a similar offering, but it's not really an integrated solution set."
Other VPN hardware/software offerings include Shiva Corp.'s VantagePath and 3Access VPN from 3Com (Oct. 6, 1997, page 29).
Bay has a three- to six-month jump on competitors to convince the Internet service provider channel to carry its product, said Maribel Lopez, of Forrester Research.
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