Network General bought at knock-down price

NetScout is to buy Network General, the company behind the legendary Sniffer, for around US$205 million in cash, stock and debt.

The deal gives NetScout, which specializes in network performance management, access to the expert packet analysis tools which it currently lacks, and which it needs to augment and underpin its network reporting systems.

Network General has in recent years tried to recast itself as a supplier of IT service assurance and application intelligence systems, and has introduced network dashboards and reporting tools. However, it has struggled to persuade its customers to look beyond Sniffer - and now it looks as if Sniffer was really the only thing it was bought for.

In the short term, NetScout said it will continue to support both company's full products line. Jim Frey, its marketing VP, said it will also start work on integrating Sniffer into its performance management tools, so they can use Sniffer data to augment NetScout's network probes, and will integrate NG's dashboards with its own.

It seems clear though that in the long term, it's the NetScout reporting tools that will come out on top, with Sniffer added in for when packet analysis is needed.

"Sniffer was the definitive tool for trouble-shooting," said Frey. "There were others around that we could have bought, but then we'd always have been asked 'Is this as good as Sniffer?' Now we can strip away the parallel activities of the two companies and focus on our core competencies."

Competitors were quick to point out how low the purchase price looked -- less than the US$275 million that the venture capital funds Silver Lake Partners and Texas Pacific Group paid to buy Network General out of MacAfee in 2003, and far less than the $1.3 billion MacAfee paid for it in 1997.

They claimed that this shows just how confused NG's management has been since 2003, and how out-dated its Sniffer technology has become.

"The lackluster financial performance of both Network General and NetScout demonstrates that their technologies have struggled to keep pace with the performance-first demands of modern enterprise networks," alleged Steve Harriman, the marketing VP at NetQoS, another network reporting specialist.

He added, "This is yet another change of management at Network General that creates more uncertainty about the future of their legacy investments in Sniffer technology."

"NG has no core competency," agreed Ian Cummins, European sales director at Sniffer rival Network Instruments. "It has stopped improving its core Sniffer product line and instead has focused on higher-end reporting and dashboard analytics. As a result, its customer base has been shrinking due to spiralling maintenance costs, increased competition, and poor customer support."

However, according to Jim Frey, the price was not as cheap as it looked. He said that the stock element means that the two VC funds will end up owning 16 percent of the combined company, and will have seats on the board of the 'new' NetScout.

He added that, contrary to Harriman's assertions, the acquisition will see NetScout double its R&D budget and will also give Sniffer development the focus it has lacked.

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