Three months ago, mini Internet-security specialist Secure Computing (NASDAQ:SCUR) found itself unceremoniously dumped from our Motley Fool Rule Breakers recommendation list, a victim of its own weak performance. With second-quarter 2008 earnings news having come out Monday evening, it's time to check back in and determine whether Secure Computing deserves its place back at the table.

Not yet
Citing a history of poor performance relative to rivals like Check Point Software (NASDAQ:CHKP) -- and before that, Symantec (NASDAQ:SYMC), McAfee (NYSE:MFE), and Websense (NASDAQ:WBSN) -- fellow Fool Tim Beyers called SC at best a "turnaround" story, and definitely "no longer a growth story." Why?

Mainly because of guidance. As you may recall, we originally recommended SC on the promise of 20% annual growth. But back in May, SC warned it would generate just $3 million to $4 million in operating cash flow in Q2, flat billings, and just a percent or two of net revenue growth. Hardly what we signed up for.

Now, as it turned out, SC did better than that (and worse). Revenue was up 7% and billings up 5%. The firm booked an $0.18-per-share loss under GAAP. But more importantly to me, it generated only $2.9 million in operating cash flow, missing even the bottom level of its guided amount. Meanwhile, management continues to dilute outside shareholders excessively, predicting that its ever-expanding share count will crest to 75 million in three months.

Not good enough
Granted, SC promises to do better next quarter, and increase its operating cash flow to $7 million or $8 million. But last year, it did nearly $13 million. In other words, we're still heading in the wrong direction in the cash flow department.

Right now, I value the stock as follows: Free cash flow for the past 12 months comes to $29 million. At the present sub-$300 million market cap, the resulting price-to-free cash flow ratio of 8.5 would make SC a screaming bargain were the company growing at the aforementioned 20% rate. Unfortunately, management's latest guidance is for something more like 3% revenue growth (and yet another net loss under GAAP).

Fools, not only is this not a growth story -- it ain't even a turnaround.

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Symantec is a Motley Fool Inside Value pick.

Fool contributor Rich Smith regretfully admits that he owns shares of Secure Computing. But he's meaning to rectify that just as soon as The Motley Fool's disclosure policy permits it (i.e. no sooner than 10 days after publication of this column).