SafeNet unit wins defense contract

March 03, 2007|By Stacey Hirsh | Stacey Hirsh,Sun reporter

SafeNet Inc., the Harford County encryption technology company, said yesterday that its subsidiary was awarded a contract of up to $400 million with the Department of Defense - SafeNet's largest contract to date.

Mykotronx Inc., SafeNet's Torrance, Calif.-based subsidiary with offices in Columbia, won a five-year contract for its encryption technology. The contract is for up to $400 million in orders, but does not guarantee the Defense Department will order that much.

SafeNet said the new equipment is part of the government's continuing program to update its encryption technology. The contract follows one for $150 million awarded to SafeNet last year by the Department of Defense to update its encryption technology.

"It's the biggest contract the company has ever seen, so that just shows great growth for our business and further opportunities and interest in our products," said Donna St. Germain, a SafeNet spokeswoman.

SafeNet makes a range of encryption technologies to protect communications and sensitive data for businesses and the government. The company sells information security hardware, software and chips, and secures information on a range of technologies from satellites to cell phones.

SafeNet makes smart cards, for instance, that use both passwords and biometrics, such as fingerprints, to identify users.

The Belcamp company has come under scrutiny after announcing in May that it received a federal subpoena for information about its stock option awards as well as an informal inquiry from the Securities and Exchange Commission.

SafeNet is one of dozens of publicly traded companies that have come under federal investigation for possible illegal backdating of option grants.

Backdating is when options are awarded with an effective date other than their grant date to take advantage of previous declines in the stock. The effect is to make the option potentially more valuable.

SafeNet formed a special committee, which retained counsel and forensic accountants, to investigate the option grants.

In September SafeNet said it would have to revise financial statements from 2000 through March 31, 2006, because the accounting of some options grants used "incorrect measurement dates under applicable accounting rules in effect at the time."

A month later SafeNet's chairman and chief executive, Anthony A. Caputo, resigned along with Carole Argo, who was president, chief operating officer and acting chief financial officer, as a result of the probe.

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