[ISN] Boston Globe article: Waiting for the security payout

From: InfoSec News (isnat_private)
Date: Tue Jun 04 2002 - 01:52:47 PDT

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    Forwarded from: "Boivin, Patrice J" <BoivinPat_private-mpo.gc.ca>
    By Ross Kerber 
    Globe Staff
    Cyber terrorism jitters were supposed to boost the fortunes of
    information technology companies specializing in security. But thus
    far, even as the fears and attention to network breaches escalate, the
    promise of increased business has largely failed to materialize.
    Companies such as RSA Security Inc. of Bedford and California-based
    VeriSign have reported losses and layoffs lately. Competitors like
    Netegrity of Waltham and New York's Predictive Systems, which has a
    Waltham operation, haven't fared much better. Most blame weak
    technology spending within the private sector and say increased
    government spending on technology has yet to offset the drop-off in
    business from corporations.
    Even the FBI's high-profile restructuring of its priorities last week,
    in which it announced it would put a new emphasis on thwarting cyber
    terror and building its information technology base, didn't include
    new spending requests. The omission means the FBI will likely ''focus
    on finding more efficiencies in their use of resources,'' said William
    Whyte, director of research at Ntru Cryptosystems Inc. in Burlington,
    a closely held maker of security software for smart-card systems like
    those used for subway fares.
    The light demand for security products seems counterintuitive. Major
    industries including banking, transportation, and energy services have
    all established trade groups to improve their defenses against cyber
    attacks, cooperating with the White House Office of Homeland Security.
    Partly as a result, International Data Corp. in Framingham predicts
    the market for Internet security software will grow from $6 billion in
    2001 to $14.6 billion by 2006.
    At the same time, the government itself has increased information
    technology outlays, with a heavy emphasis on security. For fiscal year
    2003, the Bush administration requested $52 billion in federal
    information-technology spending, a $4 billion increase over 2002.
    But these steps thus far have not led to specific purchases, said John
    Worrall, the RSA vice president for marketing. ''Congress has
    allocated a ton of money for security, but that doesn't mean the
    security industry is going to see a benefit from that immediately,''
    he said.
    ''If there's a significant increase in spending after 9/11, no one's
    seeing it,'' Worrall said. For the three months ended March 31, RSA
    revenue was $55.5 million, down from $76.3 million a year earlier. It
    posted a quarterly loss of $13.7 million, compared with net income of
    $9.8 million for the same period in 2001.
    RSA's most upbeat announcement lately is that its products are
    featured in the new movie thriller ''The Sum of All Fears.'' The movie
    portrays CIA agents logging into a computer network using passcodes
    created by RSA's random-number generating devices. Ironically, the
    company's financial results suggest the devices haven't generated as
    much excitement in real life.
    In Waltham, Netegrity reported a weakened first-quarter performance,
    with revenue falling to $22 million from $26.3 million a year ago. The
    company lost $2.7 million, partly due to the costs of an acquisition,
    compared with net income of $3.3 million a year earlier.
    Netegrity said it's optimistic that federal sales eventually will pick
    up the slack left by private-sector demand and notes it has made
    oversight of federal sales into a full-time job for an executive, Pete
    Morrison. ''I can't respond fast enough to the federal opportunities
    that are there,'' he said.
    For instance, Morrison said Netegrity is in talks with the FBI about
    selling the bureau new management tools such as the company's
    SiteMinder software, which can control who has access to a given
    database. The agency is interested in the product as its agents' roles
    expand under new laws like the Patriot Act, he said.
    A few bright spots have come in smaller markets where start-ups have
    found niches. Ntru, which has about 30 employees, raised $26 million
    in a second round of venture-capital last year, enough to keep running
    at least through 2004.
    Meanwhile, in Waltham, Maria Cirino, chief executive of closely held
    Guardent Corp., says the company expects to double its revenue to $30
    million this year selling network security services. At its own data
    center in Rhode Island, Guardent remotely monitors and stops
    intrusions into the computer networks of nearly 1,000 customers.
    ''Everybody wants better security, but they're realizing they can't
    get it just by buying more firewalls'' and other products from larger
    companies, she said. ''They need more specialist firms'' that can
    operate security software and thwart intrusions.
    Ross Kerber can be reached at kerberat_private
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