FTP Software, Inc.

100 Brickstone Square, Fifth Floor
Andover, Massachusetts 01810
U.S.A.
(508) 685-4000
Fax: (508) 684-6978
Web Site: http://www.ftp.com

Public Company
Incorporated: 1986
Employees: 740
Sales: $158 million (1996)
Stock Exchanges: NASDAQ
SICs: 7372 Prepackaged Software; 7373 Computer Integrated Systems Design; 5045 Computers, Peripherals & Software

FTP Software, Inc. is a technology leader in the development of infrastructure software for electronic commerce and exchange of information across public and private networks. The company also provides applications and services that allow customers to create VIP Networks. Based on the premise that organizations manage people and their access privileges, the VIP Network enables customers to extend their network beyond traditional boundaries in a secure and manageable manner to encompass employees or associates anywhere, and to build enterprises to enable electronic commerce and virtual workgroups.

Named after the Internet term “File Transfer Protocol,” the company is engaged in the design, development, marketing, and support of client networking software products based upon the industry standard Transmission Control Protocol/Internet Protocol (TCP/IP), data communications protocol suite, enabling personal computer (PC) users to find, access, and use heteroge-nous hardware, information, and applications resources across local area networks (LANs), enterprise-wide and global networks, and a variety of operating systems, computing platforms and network environments. The company was incorporated in January 1986 in Massachusetts and is headquartered in Andover, Massachusetts, with offices in California, Virginia, England, France, Germany, Japan, Singapore, and Sweden. It went public in 1993.

Origins at MIT

The company had its beginnings, however, at Massachusetts Institute of Technology in the mid-1980s when five students wrote a version of networking language TCP/IP that allowed DOS-based IBM PCs to communicate with mainframe computers. Seeing the potential profit to be gained if their language was adapted to work with other systems, those five graduates founded FTP. By the time companies began replacing mainframe systems with personal desktop computers, FTP was ready to link the two.

With its VIP Network architecture, FTP Software is laying the groundwork for a transparent, software-based “virtual network” that connects users regardless of location, hardware or network protocol. The company develops, markets, and supports software products in three areas: Client networking for fast and intuitive user network interfaces; server networking for linking and extending enterprise networks; and agent applications that enable network administrators to manage, diagnose, and reconfigure IP network clients from a central site. Some key software products created and/or developed by the company include InterDrive networking applications; LANCatch, a network utility; LANWatch, a network analyzer; PC/Bind, a DOS-based domain name server; PC/SNMP Tools, a network management program; and PC/TCP, an internetworking system. Products under development in the late 1990s included Esplanade, a Web server; Explore and Explore Anywhere for Windows, Internet access programs; and FrontPage, a Web page development program.

The Nature of the Industry and the Competition

The software industry is one of the fastest-growing markets in the world. Since the late 1970s, computers have become more and more commonplace. Therefore, the computer industry is extremely competitive and is characterized by ever-evolving industry standards, the frequent introduction of new products and constant product enhancements. Continuous improvement in product reliability, compatibility, memory use, and performance make computer hardware and software practically obsolete from the moment they are released into the marketplace. The company’s networking software products compete with major computer and communications vendors, including large competitors such as Adobe, Artisoft, DEC, IBM, Microsoft Corporation, Netscape, Novell Inc., Sun Microsystems Inc., and Wang, as well as smaller companies like Attachmate, Banyan Systems, Bay Networks, Cheyenne Software, Cisco Systems, Computer Network, Digi International, DIGICON, Gandalf Technologies, Inso, Microcom, Microtest, NetManage Inc., ON Technology, Retix, Spry, Sterling Software, TGV Software, VMARK Software, Wollongong, and WRQL. Some of the company’s competitors have larger financial, technical, sales, and marketing resources than FTP, as well as greater name recognition and a larger customer base. Several of the company’s competitors have also developed proprietary networking applications and provide a TCP/IP protocol suite in their products for little or no additional cost. Terminal emulation software makers such as Attachmate Corporation and Wall Data Inc. are also beginning to implement their own versions of TCP/IP. Because FTP’s core product lines are based upon the TCP/IP, the introduction of such protocol suites by the larger companies makes the competition very fierce.

The company also manufactures networking, agent, directory services, and security software products, a new, but still rapidly changing market. And, again, the company competes against such corporate giants as Sun, Adobe, and Microsoft.

The Mid-1990s and the Future

The company has grown slowly but steadily. In 1994, the company acquired technology licensed from Spyglass Inc. and Unipalm Ltd. for approximately $4.9 million. March 1995 saw the company acquiring substantially all of the assets of Keyword Office Technologies Ltd., a developer of document viewer and conversion software products, for approximately $2.4 million. In August of the same year, the company entered into a multiyear joint marketing and development agreement with Open Market Inc. under which the company has the right to sell certain server products and to develop the server technology for use in future software platforms.

In February 1996, the company acquired the Mariner Internet searching software product line from Network Computing Devices Inc. for approximately $7.4 million in cash. The following month, the company acquired first the GroupWorks project team management utility software product of, and then all of the assets of, HyperDesk Corporation for approximately $6.3 million in cash. In April, the company acquired all of the outstanding shares of Campbell Services Inc., the developer of OnTime, a scheduling software product, for approximately $15 million in cash. July saw the company acquire Firefox Communications Inc., a supplier of server-centric departmental and LAN-based IP solutions and services, for a net purchase price of $61 million through the merger of Firefox with a wholly owned subsidiary of the company.

In September 1996, the company decided to completely realign itself. FTP Software announced the unveiling of its VIP Network strategy, developed to entirely focus the company on a new strategic vision of developing and marketing a software architecture concept designed to enable organizations to secure, manage, and transparently extend their networks beyond traditional boundaries. This software architecture concept is to be developed with the intent of helping the company’s customers to support mobile personal computer users and remote sites, to build virtual collaborative workgroups within and across the organization, and to facilitate electronic commerce by building federated networks between and among the organization and its customers, suppliers and other business partners. The concept is threefold: client networking products; server networking products; and agent applications.

Part of the strategy involves streamlining the company over a period of years, spinning off, through the sale to third parties, the company’s collaborative lines of business and to discontinue other selected non-material product lines. One sale occurred in June 1997, when the company sold its KEY view, KEYview Pro, and KEYpak email utility product line to Verity Inc. for approximately $1.5 million. The product line allows users to view, convert, compress, and secure most file types, whether encountered on the Internet, corporate intranets, received as email attachments or found on a hard drive or network and can be used as a stand-alone application or integrated with email or groupware applications or act as a plug-in to Web browsers.

Another part of the strategy involves strengthening the company through new leadership, greater operational discipline, and new corporate alliances. Also under this strategy, the company released products such as InterDrive(r) Client 2.1 NFS for Windows 95 and Windows NT; Internet Gateway for Windows NT; OnNet(r) 32 v2.0, an internetworking program, as well as related products, Services OnNet, a configuration management package and X OnNet, an applications access program; and Secure Client v3.0 for Windows 95.

Company Perspectives:

FTP Software, Inc. is a technology leader in the development of infrastructure software for reliable, secure and manageable electronic commerce and exchange of information across public and private networks. The company’s mission is ’ ’to be the market leader in providing infrastructure software solutions for deploying, managing and securing IP networks.’’

The company also won numerous awards in 1996 and 1997 and received widespread industry recognition for its products and services, including the 1996 Internet Excellence Award from Network World & Intranet; Best TCP/IP Application Suite from Internetwork; a New Product Achievement Award from ComNet ’96; Data Communications’ Tester’s Choice Awards for Secure Client v3.0 for Windows 95, a replacement TCP/IP stack, and a beta version of the Network Access Suite v3.0 for Windows 95 and NT 4.0, a collection of TCP/IP applications and utilities, the only two products chosen for this distinction; and a STAR Award from the Software Support Professional Association. The company also achieved two industry firsts with client networking products when it released Support for WinSock 2.0 and Support for IPv6 and IPSec.

In July 1997, in line with the new Network strategy, the company restructured its business into three strategic business units: the Agent/Directory Management Business Unit, an advanced technology business unit to develop and market next generation network administration and management applications based on the company’s leading-edge Java agent and directory technologies such as IP Auditor and IP Distributor, both released in May 1997; the IP Technology Business Unit, to develop and market the company’s established client and server-based Gateway technologies, product solutions and networking products, as well as its other IP technology components; and the VIP Network Applications Business Unit, to develop and market the company’s desktop and web-based network applications solutions, including its award-winning 32-bit Network Access Suite applications, along with its OnNet family of products and network application products which address the client and network computing markets, Internet Gateway products, as well as its other IP technology components.

Also in 1997, FTP Software began working in conjunction with other companies such as IBM, Lotus, Check Point Software Technologies Ltd., Cisco, Entrust Technologies, IRE, Raptor, Timestep Corporation, Trusted Information Systems, Chrysler Corporation, EDS, I-NET, MCI, Netrex, Precision Guesswork, and Netscape to develop new and improved computer programs. One such program released in 1997 was Network Communications Suite, a package which obtains multiple desktop software packages to solve a user’s enterprise communications need.

As the software industry continues to grow, FTP Software is in a good position to continue operating as an industry leader.

Principal Subsidiaries

Campbell Services Inc.; Firefox Communications Inc.; Firefox (U.S.) Inc.; FTP Software Asia Inc.; FTP Software (Asia Pacific) Pte Ltd. (Singapore); FTP Software Canada Ltd. (Canada); FTP Software Export Inc. (Bahamas); FTP Software Kabushiki Kaisha (Japan); FTP Software GmbH (Germany); FTP Software Limited (U.K.); FTP Software Security Corp. Inc.; FTP Software Worldwide Inc.

—Daryl F. Mallett