Security scares

The expected boom in corporate security-related purchases has yet to materialise. Quarterly results from security software specialists were evidence of continued customer deferrals, heightened competition and generally poor trading conditions.

Check Point Software, for example, blamed cutbacks on corporate IT spending for disappointing results for the first quarter to March 2002. The Israel-based company suffered a 28% fall in revenues to $104.6 million (€119.2m) and a 24% decline in net income to $63.5 million (€72.4m). Analysts suggest the firewall software giant is also under increasing pressure from rivals Cisco Systems and NetScreen. Chief executive Gil Shwed denied this, but had few words or encouragement. “Visibility remains limited,” he sighed.

Stonesoft, which has complained to the European Commission in the recent past that Check Point was abusing its dominant market position, also reported disappointing figures. Sales at the Finnish firewall and virtual private network vendor plummeted 42% to €9.8 million. This was due to weak market conditions and the sale of its systems integration business, the company said. A gain of €10.2 million from the sale at least partly compensated for falling revenues and restructuring charges, pushing the security software group €700,000 into the black. In the same period last year, Stonesoft made losses of €2.2 million.

Meanwhile, Aladdin Knowledge Systems, which sells anti-piracy software, made some progress in building sales and reaching profitability. Revenues at the Israeli company nudged ahead 2% to $12.5 million (€14.3m) thanks to increasing demand for its content and Internet security products. “Efficiency measures,” according to CEO Yanki Margalit, helped narrow losses to $332,000 (€360,000) from $509,000 (€553,000) a year earlier.

In contrast, ActivCard, the French supplier of authentication and identity technology, saw first-quarter losses balloon to $28.6 million (€32.6m) from $371,000 (€404,000) the previous year. Management blamed this on a steep restructuring charge and $15 million (€16.3m) written down to cover the 2001 acquisition of Internet authentication group Authentic8. Sales jumped 15% to $8.2 million (€9.3m) thanks to a series of acquisitions in 2001.

In the US, strong headline figures for Verisign’s first-quarter results masked dismal trading conditions. Sales at the Internet security vendor rose 54% to $327.8 million (€356.5m). This was far lower than expected, given the string of acquisitions Verisign has picked up in recent months. Analysts say that corporate IT spending delays and growing competition in its domain-name business are to blame for the sales shortfall. The company did narrow its loss to $20.9 million (€22.7) from $1.4 billion (€1.5bn) in the first quarter of 2001 — but much of this was due to an accounting change that eliminated its hefty goodwill amortisation charges.

Strong results from anti-virus and network security Network Associates were overshadowed by revelations that it will restate its results for 1998, 1999 and 2000. Sales in the first quarter of 2002 rose by a third to $220.7 million (€239.9m). Combined with a $6.7 million (€7.3m) gain from selling assets, this upturn in sales pushed the company $15.8 million (€17.3m) into the black, from losses of $47.4 million (€51.5m) in the first quarter of 2001.

Network Associates faces a Securities and Exchanges Commission investigation into its accounting practices. The same goes for RSA Security, the Internet security software vendor. That was not its only recent piece of bad news. The company fell $13.7 million (€14.9m) into the red during the first quarter of 2002, from profits of $9.8 million (€10.6m) in the same period last year. Management blamed weak corporate IT spending for a 27% fall in sales to $55.5 million (€60.2m). Analysts point to tougher competition from rivals Secure Computing and Netegrity. The need to get costs in line with lower sales prompted executives to unveil a restructuring plan, a second round of job cuts and news that some product lines will be stopped.


Global results reported in March/April (all figures in US$ millions)
Company   Activity   Country   Period   Period End   Revenue   Change   Net inc   Prev n.i  
Actuate Corp Enterprise reporting s/w US 1Q02 31-Mar 28.8 -19% -0.2 1.7
Ariba E-marketplace s/w US 2Q02 31-Mar 57.2 -36% -154 -1,835.20
Brio Software Data analysis s/w US 4Q02 31-Mar 25.3 -43% -3.8 -0.6
Citrix Systems Server applns s/w US 1Q02 31-Mar 142.3 7% 26.7 28.9
Electronic Data Systems IT services US 1Q02 31-Mar 5,341.00 7% 354 446
EMC High-end storage systems US 1Q02 31-Mar 1,302.00 -44% -76.9 398.8
FileNet Content management s/w US 1Q02 31-Mar 86.2 2% 1.4 -5.6
Hyperion Solutions Analytic applns &OLAP s/w US 3Q02 31-Mar 120 -10% 3.1 -1.3
i2 Technologies Supply chain mgmt s/w US 1Q02 31-Mar 168.4 -54% -34.8 -774.2
IBM Systems &IT services US 1Q02 31-Mar 18,551.00 -12% 1,192.00 1,750.00
Intel Semiconductors US 1Q02 30-Mar 6,781.00 2% 936 485
Internet Security Systems Internet security s/w US 1Q02 31-Mar 58.4 -5% 3.4 6.5
Microsoft PC applns/systems s/w US 3Q02 31-Mar 7,245.00 13% 2,738.00 2,451.00
NCR Data warehousing/fin sys US 1Q02 31-Mar 1,247.00 -9% 4 117
NetIQ Systems management s/w US 3Q02 31-Mar 74.5 95% -180.3 -116
Network Associates Computer security s/w US 1Q02 31-Mar 220.7 32% 15.8 -47.4
PeopleSoft Business applns s/w US 1Q02 31-Mar 483.3 -6% 44.5 36.1
Quantum Storage systems US 4Q02 31-Mar 242.6 -21% -17.9 20.4
Rational Software Application dev s/w US 4Q02 31-Mar 180.1 -25% -11.7 6.6
RSA Security Security s/w US 1Q02 31-Mar 55.5 -27% -13.7 9.8
SeeBeyond Technology Appln integration s/w US 1Q02 31-Mar 40.4 -18% 2.9 -4.4
Siebel Systems Customer relationship s/w US 1Q02 31-Mar 477.8 -20% 64.6 76.9
Sun Microsystems Workstns, servers, web s/w US 3Q02 31-Mar 3,107.00 -24% -37 136
SunGard Data Systems Computer services US 1Q02 31-Mar 608.2 34% 70 54
Sybase Database &appln dev s/w US 1Q02 31-Mar 211 -8% -116.4 14.9
Symantec Security &appln dev s/w US 4Q02 29-Mar 310.8 24% 4.8 -27.4
Unisys Systems &services US 1Q02 31-Mar 1,362.50 -16% 32.7 69.3
Verisign Internet security s/w US 1Q02 31-Mar 327.8 54% -20.9 -1,377.40
Veritas Software Data storage s/w US 1Q02 31-Mar 370.4 -4% 44.5 -156.1
Vignette Web customer s/w US 1Q02 31-Mar 46.4 -49% -37.9 -229.6
WebMethods Appln integration s/w US 4Q02 31-Mar 50.7 -18% -15.7 -46.8
All currencies converted to US dollars at current exchange rates


European results reported in April/May 2002 (all figures in € millions)
Company   Activity   Country   Period   Period End   Revenue   Change   Net inc   Prev n.i  
ActivCard Security s/w France 1Q02 31-Mar 9.3 15% -32.6 -0.4
Aladdin Knowledge Systems Systems security products Israel 1Q02 31-Mar 14.3 2% -0.4 -0.6
Atos Origin IT services France 1Q02 31-Mar 749.2 3% n/a n/a
Azlan Group Systems integrator UK 2H02 31-Mar 505.1 -6% 12 12.5
Cap Gemini Ernst &Young IT services France 1Q02 31-Mar 1,873.00 -15% n/a n/a
Check Point Software Tech Internet security s/w Israel 1Q02 31-Mar 119.2 -28% 72.4 95.4
Dassault Systemes Engineering s/w France 1Q02 31-Mar 182.5 11% 25.3 18.9
GL Trade Connectivity s/w France 1Q02 31-Mar 28.1 34% n/a n/a
Groupe Bull Systems &IT services France 1Q02 31-Mar 362.4 -11% n/a n/a
Heyde Consulting &sys integration Germany 4Q01 31-Dec 24.5 -17% n/a n/a
Himalaya Web integration software France 2H01 31-Dec 10.6 0% n/a n/a
Hubwoo B2B management France 1Q02 31-Mar 1.2 165% n/a n/a
Icon MediaLab Int’l Internet development svcs Sweden 1Q02 31-Mar 24.7 -48% -23.7 -29.1
IDS Sheer Business process consult Germany 1Q02 31-Mar 41.7 17% n/a n/a
Industrial &Financial Sys IFS Business appln s/w Sweden 1Q02 31-Mar 81.8 2% 1.5 -10.3
ILOG S/w components France 3Q02 31-Mar 26.4 -5% 3.3 3.5
InfoVista Network performance s/w France 3Q02 31-Mar 7.8 11% -1.1 -1.5
Int’l Business Sys Business appln s/w Sweden 1Q02 31-Mar 72.2 10% -0.3 -0.9
Intentia Business application s/w Sweden 1Q02 31-Mar 99.3 3% -4.3 -4.7
Intershop Communications Ecommerce s/w Germany 1Q02 31-Mar 12.2 -40% -13.3 -34.6
InterX Portal/content mgmt s/w UK 3Q02 31-Mar 0.1 -94% -17.1 -27.9
Ixos Software SAP R/3 imaging s/w Germany 3Q02 31-Mar 32.1 18% 2.9 5.1
Micromuse Systems management s/w UK 2Q02 31-Mar 44.5 -34% 0.5 7.9
NET2S Communications technology French 1Q02 31-Mar 11.1 -16% n/a n/a
Orchestream Holdings Network mgmt s/w UK 1Q02 31-Mar 5.4 52% -7.7 -3.5
Rolfe &Nolan Financial s/w UK 2H02 28-Feb 18.7 -13% -7.5 -2.6
Sage Group Financial applns s/w UK 1H02 31-Mar 453.3 22% 72.8 66.1
SAP Business appln s/w Germany 1Q02 31-Mar 1,658.00 9% 12.1 117
Software Database and devmnt s/w Germany 1Q02 31-Mar 116.4 -9% -2.4 -1.5
Stonesoft Corporation Security s/w Finland 1Q02 31-Mar 9.8 -42% 0.7 -2.2
Terra Lycos Web search services Spain 1Q02 31-Mar 161 -10% -130 -174
All currencies converted to Euros at cuirrent exchange rates.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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