By TED BRIDIS
Associated Press Writer
March 24, 2006
WASHINGTON (AP) - A leading Israeli software company failed to resolve
security objections by the Bush administration over its plans to buy a
smaller U.S. technology rival and abruptly abandoned the $225 million
Check Point Software Technologies Ltd. of Ramat Gan, Israel, withdrew
its plans Thursday near the conclusion of a rare, full-blown
investigation by a U.S. review panel over the company's plans to buy
Check Point had been told U.S. officials feared the transaction could
endanger some of government's most sensitive computer systems.
Lawyers for the companies offered to attach conditions to the sale
that executives believed were onerous but were intended to satisfy the
concerns expressed by the review panel, said one person familiar with
the process. But no agreement could be reached.
The Treasury Department, which oversees the Committee on Foreign
Investments in the United States, formally accepted Check Point's
request to withdraw from the review process.
The objections by the FBI and Pentagon were partly over specialized
intrusion detection software known as ``Snort,'' which guards some
classified U.S. military and intelligence computers.
Snort's author is a senior executive at Sourcefire, based in Columbia,
Md., near the ultra-secret National Security Agency.
The investigation was carried out by the same U.S. review panel that
approved the now-abandoned ports deal involving Dubai-owned DP World.
Sourcefire said in a statement it was prepared to continue operating
independently as a booming software security company. One financial
analyst said Sourcefire may limit future transactions with U.S.-based
companies to avoid another security review.
``Given the CFIUS concerns, they may have to limit their potential
partners,'' said Peter Kuper of Morgan Stanley. ``A U.S. acquirer
would be a lot simpler and cleaner.''
In private meetings between the panel and Check Point, FBI and
Pentagon officials objected forcefully to letting any foreign company
acquire some sensitive Sourcefire technology for preventing hacker
break-ins and monitoring data traffic, an executive familiar with the
discussions previously told The Associated Press. This executive spoke
on condition of anonymity because government negotiations are supposed
to remain confidential.
Under the sale, publicly announced Oct. 6, Check Point would have
owned all Sourcefire's patents, source-code blueprints for its
software and the expertise of employees.
The review panel privately notified Check Point on Feb. 6 it intended
to fully investigate the transaction's security risks, the executive
said. That was days before the furor erupted over the Dubai ports
Check Point disclosed the news to investors Feb. 13, but the
announcement drew little attention despite escalating scrutiny and
interest in Washington over such reviews.
The U.S. committee has concluded only 25 full-blown investigations in
more than 1,600 business transactions it has reviewed since 1988. In
roughly half the investigations, companies pulled out of the deal
rather than face imminent rejection.
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