Rainbow Tech Seeks Pot of Gold in China
Irvine-based Rainbow Technologies Inc. today will announce it is merging its China operations with a Chinese company to sell digital security products in that country.
In a deal being termed a joint venture to accommodate China’s laws restricting ownership of Internet firms, Rainbow and Beijing-based Goldensoft Co. Ltd. will combine their China operations to form Rainbow Goldensoft Co. Ltd., which will control more than 80% of the market for software security, the companies said.
Rainbow will be the majority owner of the company, which will be launched Dec. 1 and will absorb Goldensoft. It will 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 revenues 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.
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.
“The product is not unique to Rainbow, but they have experience doing business there, and that will allow them to take new products into China faster,” said Eric Hemmendinger, an information security analyst at the Aberdeen Group, a market research firm in Boston.
