With the plethora of viruses and worms threatening personal and business systems, one would expect the computer security industry to be thriving. RSA Security
RSA's fourth-quarter results dropped slightly from the prior year. Net profit was down 0.8% to $11.7 million, while earnings per share remained at $0.16. Sales were also off, falling 2% to $81.7 million for the quarter.
With its strong performance for the rest of the year, the company was able to overcome the disappointing finish. RSA reported a 21.1% full-year earnings increase to $42.4 million, or $0.58 per share. Revenue climbed slightly to $310.1 million for the year.
Within days of reporting the so-so results, the company announced two huge deals with Japanese banks. In one, RSA signed a $10 million, five-year contract to provide a Web identity authentication system to Japan Net Bank, the first Internet-only bank in Japan. In an even bigger deal (customer-wise), RSA also agreed to provide Sumitomo Mitsui Banking Corporation with two-factor authentication for its nearly 6 million online customers.
With these latest deals, along with the 700 new customers it acquired during the quarter, the security company seems to have overcome its plateau, and it's now ready to reach new heights.
While its stock certainly isn't cheap, RSA does seem to be reasonably valued. It has a trailing P/E slightly below 26. That's much higher than Check Point
Despite the lackluster finish, RSA had a good year overall. It continues to aggressively add to its business through new customers and acquisitions, keeps buying back shares, and maintains a healthy balance sheet. RSA seems to be taking the right steps to secure strong results for 2006.
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Fool contributor Mike Cianciolo welcomes feedback and doesn't own shares of any of the companies in this article.