Posted at 8:45 p.m. PDT Tuesday, October 5, 1999
Intel to buy e-commerce
equipment maker
BY SCOTT HERHOLD
Mercury News Staff Writer
Intel Corp. announced Tuesday that it was acquiring IPivot Inc., a
2-year-old San Diego-based producer of electronic-commerce
equipment, for $500 million in cash.
The deal, which extends Intel's Internet-oriented product line,
recognizes that the demands of e-commerce have opened up a
growing market for products that make transactions smoother and
faster.
IPivot makes a device that uses a combination of hardware and software to direct Internet traffic to
servers -- powerful computers -- that can deliver the best response time to a customer clicking on a
Web site.
The privately held firm also makes a product that accelerates security operations on the Web,
making it quicker to examine an online brokerage account or check a credit card balance.
Jim A. Johnson, a co-general manager of Intel's Network Systems Division, said Intel had become
interested in IPivot while expanding its networking operations. Johnson said one of the attractions
was that IPivot's CEO, Brett Helm, offered a product that could deal with soaring Internet demand
now.
''It takes us 18 months to deploy a new function on a switch,'' said Johnson. ''Here, Brett has
products that are delivered, solving the problem today . . . We agreed that we could be much more
effective together than apart.''
Hal Feeney, an industry analyst for Pathfinder Research in San Jose, said the acquisition was part of
Intel's continued effort to assure itself of new markets.
''Intel has the challenge of doing several things,'' Feeney said. ''One is expanding the market for its
mainstream products and at the same time finding other ways to drive the marketplace. The more
they can grow the indispensability of the Internet, the more they can grow demand for their
mainstream products.''
Although some analysts suggested that the $500 million price was less than IPivot might have gotten
in an initial public offering, CEO Helm insisted that it was an outstanding deal.
''You bet it (an IPO) weighed in my thinking,'' he said. ''But we think we came out with a
spectacular deal. I think Intel got a fantastic deal as well.''
Among other things, the deal was a big success for IPivot's early venture capital investors, Doll
Capital Management and Enterprise Partners. Doll's million-dollar first-round investment two years
ago is now worth 50 times as much.
''We looked at an IPO very carefully,'' said Dickson Doll, the firm's principal. ''But we're always
making real-time determinations about the amount of capital, the risks and so on. We're exceedingly
pleased.''
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