Two years ago, the company widened its focus from hardware security subsystems to network security processor ICs, launching a Network Security Forum and hiring semiconductor marketing heavy-hitters Vern Little from PMC-Sierra Inc. and Mel Roberts from Mitel Corp. But by the middle of 2000, the ambitious plans for the Luna chip were being pushed out. Little rejoined PMC last year, and Roberts left Chrysalis-ITS in the spring, amid rumors that chip development plans were delayed.

A Chrysalis-ITS spokeswoman said the company had not yet decided whether to offer the Luna intellectual property to other semiconductor and system companies. Chrysalis-ITS chief operating officer David Longbottom said that cutbacks "reflect a pullback by the entire industry in investing in new initiatives. Companies large and small have to live with lower growth and focus more on existing products and opportunities."

The pullback leaves Hi/fn Inc. and SafeNet Inc. as the primary remaining players in encryption and security processing chips, though SafeNet has put more emphasis on system sales in recent months. Newcomer Andes Networks Inc., a Secure Sockets Layer processing specialist, initially was going to offer an SSL-processing chip for sale, but determined in late 2000 that network security still was more of a system sale, mandating a turn to a business plan based on dedicated security systems.