China Encryption Ruling Was Temporary, as Predicted.

Business Editors/High-Tech Writers

BEIJING--(BUSINESS WIRE)--March 14, 2000

Chinese officials have reversed an earlier order banning products that contained foreign-designed encryption software.

That puts NetFront, a Silicon Valley company with a wholly owned subsidiary in Beijing, in the driver's seat. NetFront provides online trust services for firms conducting e-commerce globally, and also acts as a gateway to doing business in China, with many of the high-level connections necessary to doing business there.

"We predicted (the ruling) would be short-lived," said Jason Wu, president & CEO of NetFront. "Our system of contacts told us it was an overreaction, and that it wouldn't last."

"Because we develop encryption software in China, with Chinese engineers, we have a localized security platform that the Chinese government can trust," said Wu, a Stanford Ph.D.

"We believe e-commerce activity in China will continue to grow, with many opportunities for US vendors -- and we will continue working with the Chinese government to safeguard e-commerce in China. NetFront would like to work with US companies to help them comply with Chinese government regulations."

While NetFront's headquarters are in Silicon Valley, its wholly owned subsidiary in China conducts nearly all of the R&D for the company. "We have a huge talent pool in China that would cost a fortune here to duplicate," said Mr. Wu. "We are very interested in leveraging resources with partners looking at the Asia market."

The company has a noteworthy track record, recently helping to build an online payment system for the People's Bank of China; a secure messaging and e-commerce transaction system for China Postal; and Web site security and credit card processing systems for The Beijing Bookstore, the largest online bookstore in Asia. The firm's mission is to become the leading online trust service for e-commerce globally.

Recent Fed Ruling Relaxing Encryption Export Restrictions a Plus

On a related note, the recent relaxation of export restrictions on strong encryption technology gives even more impetus to NetFront's lead in the Asia market.

Jim Bidzos, founder of Verisign Inc. and RSA Security Inc., now an investor in NetFront, said, "Jason Wu has built a strong team; they understand the technology, the business, and they have a big vision. They want to do in China what Verisign and RSA have done here. They are aware of the complicated regulatory issues, and my sense is they understand them and will navigate them well."

The company was formed in 1996, and expects to generate about $5 million in revenue this year. NetFront's technology fits into a Web browser and links to the company's online trust center, where the encrypted private and public keys (or IDs) reside, eliminating the complexities of user authentication and verification.