SafeNet revenue in 2Q more than triples, earnings beat estimates

Results reflect acquisition of Rainbow Technologies

July 29, 2004|By Tricia Bishop | Tricia Bishop,SUN STAFF

Network security specialist SafeNet Inc. reported second-quarter results yesterday that beat Wall Street estimates as it reaped the benefits of its acquisition of a California technology company.

SafeNet said revenue more than tripled to $54.3 million in the three months that ended June 30, the first full quarter to include the effect of its purchase of Rainbow Technologies Inc. That compared with $16.5 million in the second quarter last year.

Excluding acquisition costs, the company reported adjusted net income of $7.4 million for the second quarter, or 30 cents per diluted share. That was up from $2.1 million, or 19 cents per share, in the quarter last year, when the company had less than half as many diluted shares.

On that basis, analysts surveyed by Zacks Investment Research had expected earnings per share of 28 cents.

"Clearly the Rainbow part of the business performed adequately because that's the largest part of SafeNet," said Erik Suppiger, a network analyst with Pacific Growth Equities of San Francisco.

SafeNet, based in Belcamp, completed the $457 million deal to buy Rainbow Technologies in mid-March. The deal triples SafeNet's offices worldwide. The combined company will focus on encryption technology, public and private network security, and anti-piracy software.

SafeNet also announced a new partnership yesterday with Ingram Micro Inc., a technology distributor in Santa Ana, Calif., which will offer two of SafeNet's identity authentication products to its customers.

"The fact that Ingram approached us with this opportunity is a clear endorsement of the power and reputation of SafeNet," said Anthony A. Caputo, SafeNet's chairman and chief executive officer, in a conference call.

Caputo said that SafeNet would have access to nearly 165,000 retailers through Ingram.

But Suppiger warned that access doesn't necessarily translate into sales.

"That by itself doesn't generate a lot of growth in revenue," Suppiger said of the deal with Ingram.

Chief Financial Officer Ken Mueller said the company was looking to add about 25 positions to its 724-person work force but didn't expect the hires to affect operating expenses significantly.

SafeNet stock closed down $1.47 yesterday at $22.19

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