Irvine Firm to Merge Its Unit in China With Beijing Company

Irvine-based Rainbow Technologies Inc. plans to announce today that it is merging its China operations with a Chinese company to sell digital security products in that country.

Under a deal being termed a joint venture to accommodate China’s laws restricting foreign ownership of Internet firms, Rainbow and Beijing-based Goldensoft Co. will combine their China operations to form Rainbow Goldensoft Co., which will control more than 80% of the market for software security, the companies said.

Rainbow would be the majority owner of the company, which would be launched Dec. 1 and absorb Goldensoft. It would have 60 employees, be headquartered in Beijing and have additional offices in Shanghai and Shenzhen. Terms of the deal were not disclosed.

Rainbow derives about $7 million in revenue from Asia, with China being the fastest-growing market in that region, said Walter Straub, Rainbow’s president and chief executive.

“This deal gives us access to engineering talent over there to specifically address the e-commerce opportunities in China,” Straub said. “Adding local investment and flavor will really help our growth in China.”

The company has been doing business in China for four years, but Japan is by far the company’s largest market in Asia.

Straub said the two firms’ product lines mesh well, with Rainbow providing the high-end software security products and Goldensoft the low end.

Rainbow’s products address software piracy by adding a device to a computer that allows a piece of software to work. Without the device, the software doesn’t work.

The solution had been tried in other markets years ago but was roundly rejected by consumers who found them cumbersome. But with China’s high rate of software piracy, software publishers have been reluctant to enter the market.

Times staff writer Jonathan Gaw can be reached at jonathan.gaw@latimes.com.