Despite widespread predictions that the Sept. 11 terrorist attacks would spur demand for IT security products, security software vendor RSA Security Inc. late Thursday reported net losses for both its fiscal fourth quarter and the full year 2001.
Further compounding the bad news, President and Chief Executive Officer Arthur Coviello said on a conference call late Thursday that the company is being investigated by the U.S. Securities and Exchange Commission (SEC) over whether RSA should have disclosed changes in its method of estimating distributor revenue in a press release, as well as in a filing with the SEC. The investigation also covers some investment activity, he said.
For the fourth quarter, RSA had a net loss of US$10.1 million, including the operations of its RSA Capital venture capital division. That translates to a loss of $0.18 per share. In the fourth quarter of 2000, the company posted a $103.9 million profit, or $1.70 per share.
For 2001, the company had a net loss of $2.5 million, including RSA Capital's results, down from a profit of $205.8 million in 2000. The 2001 loss equated to a loss of $0.04 per share, sharply down from the $3.50 per share the company earned in 2000.
Revenue for the fourth quarter was $63 million, down from the $78.1 million earned in the same period last year, and just slightly under the $64 million expected by analysts surveyed by Thompson Financial/First Call. Revenue for 2001 was $282.7 million, up from $280.2 million the year before.
Net income for the company's core operating business (excluding RSA Capital) in the fourth quarter 2001 was about $400,000, or $0.01 per share, just topping First Call's forecast that the company would break even on per-share basis. In the fourth quarter of 2000, RSA earned $11 million, or $0.18 per share, from its core business.
For the year ending Dec. 31, 2001, the company posted a net income of $14.7 million from its core business, compared to $39.1 million in 2000. In terms of earnings per share, RSA earned $0.25 per share in 2001, a penny higher than analysts estimates, but down from the $0.61 earned for fiscal 2000.
In the conference call, Coviello blamed a slow economy for the company's results. He also said that the Sept. 11 attacks haven't had the effect on RSA that many expected.
"IT spending has not rebounded, and if there's a security dividend as a result of Sept. 11, we have not seen it," he said.
Infrastructure projects planned by RSA customers are being deferred because of the economy, but when they are started again, he believes that security will be at the forefront, he said.
The company expects to lose money in terms of earnings per share for the first two quarters of 2002, with profitability returning by the end of 2002.