Network security company Esphion has won a $400,000 Government grant and signed on an Asian distributor as it seeks to take advantage of the security industry's moment in the sun.

The money from Technology New Zealand, which Esphion must match dollar for dollar, will go into research and development on software products to detect internet worms.

Hong Kong security software distributor Global Orient has been recruited to extend Esphion's reach into the burgeoning Asian market. Several customer trials of Esphion's software are under way in Hong Kong.

Esphion's chief executive, Greg Cross, said more staff would be taken on to work on product development, joining the team of 15 at the e-centre at Massey University in Albany.

Esphion would also look to raise more capital in the first half of this year to supplement the $5 million it secured in 2002, largely from venture capital group TMT Ventures.

That would be timed to coincide with a push on the US market, where internet providers, major telcos and corporations would be target customers..

Cross said the global internet security market was growing swiftly on the back of heightened virus and worm activity, generating opportunities for the company.

"The market has moved towards us at a rate of knots. What we've seen in the past 12 months is more and more cyber attacks inflicting greater havoc on networks."

Esphion has created computer algorithms and designed network analysing software that detects abnormal network traffic patterns.

"Even if it's not malicious it's understanding what type of traffic it is. Is someone running a peer-to-peer filesharing network, for example?" said Cross.

Esphion's business is now split evenly between New Zealand and Australia, with local clients including Telecom and internet provider Iconz.

A selling point is that it is not based on proprietary hardware or high-end servers. Most of its customers use standard Intel servers.

Cross said the MyDoom virus outbreak, reportedly the fastest-spreading virus to date, was not as devastating as the media storm around it suggested.

"MyDoom attracted the most publicity but in terms of the impact on networks, it didn't have the impact of the Welchia worm."

Initially dubbed a "friendly" worm, as it was created to purge the MSBlaster worm from infected machines, Welchia deleted the offending msblast.exe file from systems but also opened computer ports allowing hackers to gain remote access.

Cross said he was heartened to hear Symantec executives admitting at Comdex that a level of security above that of antivirus and firewall software was needed to meet the increasingly sophisticated threats of hackers.

"It was great validation for our market opportunity."

Esphion would not initially seek a distributor in the US but would look to sell direct.

Cross said a group of MBA students from the Anderson School of Business at UCLA had written a market entry plan for Esphion that would lay the groundwork.