SafeNet's profit, revenue up slightly

White Marsh company says second-quarter upturn not expected

April 18, 2001|By Stacey Hirsh | Stacey Hirsh,SUN STAFF

SafeNet Inc., a White Marsh-based Internet security company, reported slightly higher first-quarter revenue and earnings yesterday, in line with revised forecasts, and said it did not expect business to improve next quarter.

The Baltimore County company reported revenue of $6 million for the three months ended March 31, compared to $5.8 million for the corresponding quarter last year. Net income was $431,000, or 6 cents per diluted share, compared to $357,000, or 5 cents per diluted share, in 2000.

For the second quarter of this year, SafeNet expects revenue to be about $6 million and earnings to be between 1 cent and 5 cents per diluted share. The company expects to see marginal revenue improvements in the third quarter.

The earnings, which came out after the market closed yesterday, nevertheless beat most analysts' expectations.

"It's good that they were able to squeeze a couple pennies out of it at the bottom line, but the real disappointment comes at the top line," said Brian Foote, an analyst who follows SafeNet for Ryan, Beck & Co. in New York.

Foote said SafeNet's earnings were higher than he estimated because the company spent less on research and development than he anticipated and general administration expenses went down.

Anthony Caputo, SafeNet's chairman and chief executive officer, told investors during a conference call yesterday that the company's short-term business outlook was hit by inventory reduction from customers and a slowdown in information technology spending.

"We are going through a difficult time, as are many other folks in the IT industry," Caputo said, noting that the company has remained profitable during this period and that forecasts show profits will continue to grow.

SafeNet, which changed its name this year from Information Resource Engineering Inc., makes technology that allows companies and their customers to make secure transactions via the Internet.

In January, SafeNet said it expected first-quarter revenue to be between $9 million and $9.2 million and net income to be between 21 cents and 24 cents per diluted share. But on March 30, the company sharply lowered its estimates, saying revenue would be about $6 million and net income 3 cents to 6 cents per share.

The revision sent the company's shares tumbling nearly 62 percent - from $33.38 to $12.81.

Yesterday, shares of SafeNet closed at $12.96, up 93 cents.

SafeNet's long-term outlook is good, Foote said, because of its strong management team and technology. "Longer term," he said, "SafeNet is still a very good company."

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