RSA remains one of the more appealing investment prospects in the security sector. Nearly 7 million of its authentication SecurIDs are in the market. Export restrictions have been reduced for encryption technologies, increasing international opportunities. Further success in the public key infrastructure (PKI) space will be one important factor to track.
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Encryption market leader RSA Security (Nasdaq: RSAS) is no newcomer to the security industry, having spent the last 20 years building a brand that has helped it achieve success. Since software security companies' rise in popularity, however, RSA has received more recognition. The Internet is redefining the way business is conducted as business processes -- such as human resources, procurement, finance, and marketing -- are being Web-enabled with mission-critical information moving online. The need to protect that information is great, and RSA made several announcements this week that highlighted the demand for its three core products. Yesterday, the company announced that mobile phone giant Nokia (NYSE: NOK) had selected its authentication software, or SecurID cards, for the Nokia 9210 Communicator, the Finnish phone maker's next-generation do-it-all packaged phone and computer interface. Nokia know-it-all TMF Mycroft calls it the most innovative phone in the past 100 years. In the Motley Fool's Research Internet Report on Network Security, Paul Larson discusses the little token cards: "SecurID cards are small devices that continually give a different password that is only good for a short amount of time, and when used in combination with a traditional password give a much higher level of security than passwords alone." The Nokia news reaffirms both the corporate and consumer demand for secure wireless access to critical information and applications such as email, intranets, and extranets. On Tuesday, RSA was in the news again announcing that integration applications provider SAGA Software (NYSE: AGS) had selected its BSAFE encryption software to secure the newest version of SAGA's flagship Sagavista, an e-business integration solution. Encryption software is at the core of security software, encrypting and decrypting data so it can be securely transmitted between authorized parties. If, for some reason, the encrypted data would fall into the wrong hands, the unauthorized recipient would be unable to decipher its meaning. With its BSAFE encryption software embedded in nearly 500 million different Internet applications, this is another stronghold for RSA Finally, the company said this week that consumer finance company American General Corp. (NYSE: AGC) selected RSA's Keon public key infrastructure (PKI) solution. PKI is a system that allows for electronic exchange to occur using digital certificates. This is an area of security that has received increased attention with huge demand. A federal digital signature law recently went into effect, meaning that a digital signature is now the equivalent as a signature given in person. Unlike the first two areas, RSA has a long way to go in order to achieve a similar market position in PKI. In fact, efforts to enter this space have propelled the company into direct competition with its spin-off, VeriSign (Nasdaq: VRSN), which has become a leading PKI provider. RSA is set to receive nearly $5 per share in onetime gains for the sale of its existing stake in VeriSign, so it's important to be mindful of RSA's operating results. Achieving widespread success in this space won't be easy, with increased competition from a number of companies, including Baltimore Technologies (Nasdaq: BALT) and Entrust (Nasdaq: ENTU). Nevertheless, RSA remains one of the more appealing investment prospects in the security sector. Considering that nearly 7 million of the company's authentication SecurIDs are in circulation and that export restrictions have been reduced for encryption technologies -- increasing international prospects -- there are significant opportunities for its products. Further success in the PKI space will be one important factor to track. (The Motley Fool examines the network security market in Industry Focus 2001.)
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