I was just reading a research report about a company called Netegrity....Sounds to me a lot like digitale me but much further along, better alliances and sellable to corporations.... This product, called siteminder, could this make digital me irrelevant for the business world?
Heres the report:
CONTROLLING THE USE OF YOUR WEB ASSETS
This week, we would like to take a short break from messaging software
and would like to talk about what we view as one of the hidden jewels
in our space, Netegrity. In our view, Netegrity represents a
compelling investment in the growing importance of the Web presence as
the information center of a company. As companies increasingly use
their Web sites as the main access point for information to employees,
securing access and defining access policies have become increasingly
important. We believe that Netegrity is the leader in securing which
information is accessible to each user and we are very enthusiastic
about the company's business prospects.
NETEGRITY (NETE $43 3/8)
Netegrity is an important new player in design and sales of policy
software for enabling eCommerce and other eBusiness Internet
applications. As a security company focused on enabling applications
(not just defending a network), Netegrity fills a new niche much as
VeriSign found a novel niche, and we believe that this company could
be a great franchise.
As the market for eCommerce software rapidly expands, we believe that
Netegrity could become a franchise name in this space. The central
information asset of a company is rapidly evolving to be its Web
presence, and products such as SiteMinder will likely benefit from
this platform shift.
In our view, the company should benefit from powerful and
complementary distribution partners such as Sun-Netscape Alliance, GTE
and others that we expect to be forthcoming.
As a public company restart, Netegrity has only begun to be
rediscovered by Wall Street, by our analysis. The company has been
publicly traded, but has recently changed its mission and we believe
that this new product line, SiteMinder, will bring it the recognition
we believe it deserves as a critical component of eCommerce
infrastructure.
Summary and Valuation. In our view, Netegrity is a key player that
helps satisfy the growing need for eCommerce infrastructure. At
$43.38, Netegrity is trading at 18.4x our FY00 revenue estimate of
$24.9 million. We believe there is upside to the stock as signs of
increasing market traction for SiteMinder continue. We rate the stock
a Buy.
RECENT DEVELOPMENTS
Working with emerging Application Service Providers (ASPs). The
challenges that enterprises face in building and managing their
Internet infrastructure exist in even greater complexity for an ASP
serving multiple enterprises. Corio, an application service provider,
recently licensed SiteMinder and also partnered with Netegrity to
co-develop an ASP infrastructure for delivering Internet-based
enterprise applications. Netegrity also recently joined the
international ASP Industry Consortium. The rapid development of the
ASP market creates a significant incremental opportunity for
Netegrity, in our view.
Netegrity closed a follow-on offering in November, raising $100
million. Of the 3.25 million shares, 2.5 million shares were sold by
the company; the other 0.75 million shares were offered by the selling
stockholders.
International expansion. Netegrity recently opened a new office in
London, in addition to its Paris office that was opened in January
1999, to better serve its growing base of European customers. The
company also started operations in Asia Pacific to serve the rapidly
growing eCommerce market in Asia.
Netegrity recently announced a new version of SiteMinder. SiteMinder
3.6 provides single sign-on across eCommerce sites spanning multiple
companies. This new capability enables organizations to extend their
reach with secure user access to partners, multiple corporate
divisions and affiliates. SiteMinder 3.6 also includes security
enhancements and extended platform support.
IN-DEPTH ANALYSIS
Key Lines of Business. Netegrity debuted its SiteMinder 3.5 technology
at the beginning of March 1999. SiteMinder 3.5, the first version to
be available on the UNIX platform, saw strong sales as a policy
coordinator for the different infrastructure pieces used in eCommerce.
Netegrity recently introduced the new version of this product,
SiteMinder 3.6. SiteMinder 3.6 provides single sign-on across
eCommerce sites spanning multiple companies. This new capability
enables organizations to extend their reach with secure user access to
partners, multiple corporate divisions and affiliates. SiteMinder 3.6
also includes security enhancements and extended platform support. To
facilitate and secure user access, it is necessary to manage
communication efficiently between Web servers, authentication hardware
and software (such as access cards and digital certificates), and
databases filled with critical information. SiteMinder coordinates
these different policies and helps eliminate a wide variety of the
possible security risks associated with linking one's business to the
Internet. In addition, the company also has a legacy revenue stream
from reselling Check Point firewalls.
We believe the SiteMinder software is a key enabling product for
eCommerce. Much like VeriSign (VRSN $194 13/16) or BroadVision (BVSN
$100), the software fills a critical niche for building eCommerce
applications. To remain competitive, we believe that eCommerce vendors
need to buy products like SiteMinder to help them monitor usage of
their site and control how users access information. The SiteMinder
product can be used for a variety of purposes including:
- Basic access to a Web site using passwords or authentication
mechanisms such as smartcards.
- Single sign-on to multiple applications.
- Personalized content to users based on profile, past product use,
and premium pricing models.
The architecture of the product is modular, allowing for smooth
scalability. The different components of the SiteMinder software such
as the Web agent, policy server, and directory server elements can all
scaled independently and can run on multiple servers each, if
necessary, to handle large demand. We believe that this modular
architecture will be a major advantage for the product since it
facilitates its ability to handle a larger number of users
simultaneously.
The product also can use digital certificates for authentication. It
is compatible with certificates from VeriSign, Entrust, Microsoft,
Netscape, GTE CyberTrust, and Baltimore.
SiteMinder can coordinate access to both SQL Databases (e.g.-Oracle)
or LDAP Directories (e.g.-Netscape).
Key customers. Arthur Andersen, Corio, Aetna, GTE, Ingram Micro,
Lucent, Merrill Lynch, The New York Times, E*Trade, The Boston Globe,
Houghton Mifflin, Lucent Technologies, Merrill Lynch, General
Electric, Compaq, Mitsubishi, AT&T International, AT&T Customer
Service, MCI, Radio Shack, Bristol-Myers, Delta Airlines, and Kinko's.
Partners.
- Licensees. Allaire, Banyan, GTE CyberTrust, Sun-Netscape Alliance,
Network Associates. (Netscape is a major value-added reseller for
Netegrity.)
- Co-Marketing/Development. Check Point, Entrust, Microsoft,
NetDynamics, Sun Microsystems, VeriSign.
An exciting market opportunity. According to Forrester and IDC, the
online retail market is predicted to hit more than $100 billion by
2001. To support these transactions, it is necessary to manage user
access to information as one proceeds through the purchasing process.
SiteMinder is a scalable solution to this access problem that
coordinates access policy between Web Servers, Application Servers,
Authentication Servers, and Directory Servers. The most significant
competition that Netegrity faces is from companies that decide to
develop this type of solution in-house; however, such a solution is
time-consuming and expensive, and we believe that many companies will
choose to buy the SiteMinder software instead.
Summary and Valuation. Netegrity is a key player in the growing need
for eCommerce infrastructure. At $43.38, Netegrity is trading at 18.4x
our FY00 revenue estimate of $24.9 million. We have compared it to a
basket of Web site enabling software stocks, including VeriSign,
Entrust, BroadVision, DoubleClick and NetGravity, and we believe that
Netegrity is significantly undervalued compared to these franchise
stocks. We believe that Wall Street will quickly see the value of this
stock as its recent shift toward the new SiteMinder product becomes
more apparent. At these valuations, we believe that there is
significant upside as the stock moves toward a valuation more
comparable with its peers. We rate the stock a Buy. |
