RSAS, from Bloomberg. It should break 80 today:
Network Security
E-commerce is hot, hot, hot. And what does every e-transaction need? Security. Datamonitor, a market research firm in London, expects the global market for network-security products to triple to $8 billion by 2003. For VeriSign (VRSN), this is a charming forecast.
VeriSign provides security products and services needed by Websites, businesses, and individuals to conduct commerce and communications over computer networks. It does this by selling digital identifications, also known as digital certificates, that incorporate public key infrastructure (PKI) encryption protocols. Industry analysts believe that PKI will spread in the next few years, and VeriSign is leading the way.
In simple terms, PKI uses two keys, each a complex digital character combination, for any computer-to-computer communication. The sender uses one key, the recipient the second. Not sexy, perhaps, but oh-so-necessary as banking, drug prescriptions, and other confidential transactions become commonplace on-line. AT&T, Microsoft, and Visa, among others, use VeriSign safeguards.
So far, VeriSign dominates the market. The company has sold more than 180,000 server certificates (at $300 to $1,200 per year) and claims 90 percent market share. But Stratton Sclavos, CEO of VeriSign, believes the potential market to be 10 million units. "We are quickly approaching the time when a digital signature will carry the same legal weight as your personal signature," he observes. "We see digital receipts, digital notarizations, and certified delivery of e-mails as some of the future applications."
Spun off from another company in 1995, VeriSign has grown to a projected $83 million in sales in 1999 from $1.3 million in 1996. VeriSign issued stock in 1998 at $7 per share. In the 12 months ending November 1, it split once (a second split was announced later that month) and climbed 777 percent to close just over $131. At that price, VeriSign sports a total market value of $6.6 billion.
The Competition: Entrust Technologies (ENTU), which uses PKI technology, is a direct competitor of VeriSign. It sells security software that companies manage themselves, whereas VeriSign oversees its applications from a data center in Mountain View, California. GTE and a couple of notable foreign concerns are also embracing PKI. And other network-security companies like RSA Security (RSAS), Axent Technologies (AXNT), and Network Associates (NETA) can expect to ride the e-commerce security wave, too, into 2000 and beyond.
VRSN projection: Banc of America Securities forecasts sales of over $131 million in 2000. I/B/E/S projects 102 percent annual growth over the next five years, by far the highest projection for a Bloomberg 100 company.
Sector projection: Obviously, the fortunes of the network-security industry are tied to electronic traffic. Earnings per share for Entrust are expected to more than triple this year, to 36 cents. VeriSign's are expected to grow seven-fold to 30 cents, according to Zacks Investment Research, a New York City research firm that compiles analysts' estimates. General projections for network-security companies are strong, too, although less dramatic: 25 to 30 percent
bloomberg.com |
