<http://cnews.canoe.ca/CNEWS/TechNews/TechInvestor/2004/12/09/pf-775547.html> CNEWS - Tech News: December 9, 2004 Cryptography firm Certicom posts quarterly loss, year after big U.S. contract By CRAIG WONG TORONTO (CP) - Data encryption company Certicom Corp. is reporting a second-quarter loss of about $1 million US, down sharply from a profit of $22.3 million a year earlier when the numbers were boosted by a lucrative contract from the U.S. National Security Agency. Certicom (TSX:CIC) reported Thursday quarterly revenue of $2.6 million US, compared with $2.7 million US a year ago - excluding revenues from the $25-million NSA contract. The Mississauga-based firm reports in U.S. dollars. CEO Ian McKinnon said the NSA contract has given the company a boost to help sell its technology as the standard for encryption around the world. "It has also hiked Certicom's position as the authority for strong efficient cryptography," McKinnon said during a conference call with analysts. The technology at the core of Certicom's products - elliptic-curve cryptography, or ECC - is well suited to such purposes since it can work faster and requires less computing power and storage than conventional forms of cryptography. "We see the greatest potential in intellectual property licensing as ECC adoption grows. Our focus is to maximize our share of that market," McKinnon said. During the quarter, the company used $10 million to retire its convertible debentures, which matured on Aug. 30, making the company debt free. In its outlook the company said it expects operating expenses, including cost of sales, are expected to range from $3.3 million to $3.6 million in its third-quarter of its 2005 financial year. Research Capital analyst Bruce Krugel said the NSA gave Certicom some profile, but it has yet to be seen if Certicom can deliver consistently on its strategy to sign intellectual property deals. "There's no denying they have a good stroke of valid, but what I'm wrestling with at the moment is rate of adoption and what people are prepared to pay for it," he said "We've seen two nice intellectual property licensing deals be announced so far . . . we just need to see more which would give us at least better comfort as to what the potential might be." At its annual meeting in October, Certicom said it saw a growing demand for its data encryption technology in both government and the private sector, including the entertainment industry. The company said the explosion of digital music, movies and books that are easily copied is causing companies such as Disney and Time Warner to demand that electronic devices and distribution networks be fully secure. In its most recent quarter the company reported two important contracts including one with software integration company Sybase and another with a customer that could not be disclosed for confidentiality reasons. For the six months ended Oct. 31, Certicom reported a loss for $2.2 million or six cents per share on revenue of $5.5 million. That compared with a profit of $20.7 million or 65 cents per share on revenue of $29.8 million for the same period a year earlier. During the 1999-2000 boom in technology stocks, Certicom shares (TSX:CIC) traded above $100 Cdn. However, as the dot-com mania faded and technology spending dried up, the shares fell and Certicom downsized repeatedly. Certicom shares closed up nine cents at $3.42 on the Toronto Stock Exchange on Thursday. -- ----------------- R. A. Hettinga <mailto: rah@ibuc.com> The Internet Bearer Underwriting Corporation <http://www.ibuc.com/> 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'