Law and Orders at Guidance Software

With 35,000 employees and 900 stores, OfficeMax (NYSE: OMX  ) realized it needed software to help it handle the inevitable lawsuits that plague Corporate America. So the company recently agreed to purchase the solutions of Guidance Software (Nasdaq: GUID  ) . This is no isolated event: Guidance is popular with big-time customers; more than 100 of them are in the Fortune 500.

The upshot is that growth continues to hum. In the third quarter, Guidance posted revenue of $20.3 million, up 37% over the previous year. Late last year, the company invested heavily in its sales force, which is starting to get results. However, there still was a loss of $400,000, or $0.02 per share, for Q3.

Guidance does face competition, from, among others, EMC (NYSE: EMC  ) , McAfee (NYSE: MFE  ) , and Symantec (Nasdaq: SYMC  ) . However, these companies provide mostly general-purpose security and storage systems. Guidance has the advantage of understanding the nuances of complex litigation.

Another thing to consider is that Guidance's business can be counter-cyclical. How? When economic conditions deteriorate, there is likely to be lots of litigation. Just look at the subprime mess. Might that spur a good amount of litigation, especially for major financial services companies?

Despite all this, the price of Guidance's shares has meandered over the past year. I suspect that the large investments in salespeople are a bit scary for investors. But in light of the big opportunity -- and the need for litigation software -- Guidance does look like a good play for the long haul.

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