"HNC Developing New Air Security Software"

[Xeni Jardin]

The Reuters story follows, and the HNC corporate press release
announcing the project is here:

<http://www.hnc.com/hnc/PressReleases/index.cfm?PressID=112&attributes.f
useaction=ShowRelease>

press release excerpt:

<<By detecting and scoring anomalous patterns in millions of reservation
records and other related data, the predictive software could identify
suspicious transactions. Flagged information can be immediately
investigated by experts to increase security and travel efficiency....
With the ability to instantly analyze all available structured data and
unstructured data, airlines could proactively take critical action
related to passenger safety.

"By using high-end risk analytics and decisioning engines, we can help
airlines, airports and law enforcement agencies identify patterns that
warrant further investigation - without intrusive security measures,"
explained John Mutch, chief executive officer of HNC. "Much of HNC's
technology research has been funded over the years by defense and
intelligence organizations. We're delighted to put this technology to
use to increase traveler safety."

HNC's Critical Action software, which uses anonymous mathematical
algorithms that cannot be reverse engineered, identifies patterns in
data that would not be noticed using any other method. HNC's technology
can scan structured and unstructured data, detect patterns, categorize,
prioritize and automatically route information to relevant security
agency personnel.>>

--XJ



October 4, 2001
HNC Developing New Air Security Software
By REUTERS
Filed at 5:35 p.m. ET

http://biz.yahoo.com/rf/011004/n04269364_3.html

LOS ANGELES (Reuters) - HNC Software Inc (news/quote) (HNCS.O), best
known for products that help catch credit-card and insurance fraud, said
on Thursday it was developing a program for airlines that would sweep
through reservation records for suspicious patterns and help flag
potential hijackers.

San Diego-based HNC is developing the software with privately-held PROS
Revenue Management Inc., which manages revenue systems for major
airlines, including Southwest Airlines (news/quote) (LUV.N), Delta Air
Lines Inc. (news/quote) (DAL.N) and Continental Airlines Inc.
(news/quote)``We're already in dialogue with airline companies today,''
said John Mutch, chief executive of HNC, adding that he expected the new
security software would be delivered within six months.

The new technology will mesh HNC's science-based risk detection
capabilities -- which use mathematical algorithms that identify patterns
in data -- with PROS' data-driven forecasting expertise. By scoring
patterns in millions of reservation records and other data, it will
identify suspicious transactions, which can be flagged for
investigation.

``We will be able to detect patterns -- for instance, if five people of
the same origin are traveling together and may use a certain kind of
payment, fall between the ages of 25 and 40, and had previously limited
credit history,'' Mutch said.

``These are the types of things we could use to provide risk profiles.
The relationships are subtle,'' he said.

The program would deliver a real-time scorecard to airlines, with a
range of one to 1,000, which would alert airline personnel of the
potential need to increase security.

``If a flight scored 950, the likelihood of a security risk or problem
would be very high, and the airline, for instance, could cancel or delay
the flight,'' he said.

SCORING RISKS

Depending on the score, airlines could determine whether or not to
cancel or delay a flight to re-check baggage, or question passengers, he
reiterated.

``Security threats are frequently evident in patterns of traveler data,
and our solutions can assist in analyzing these patterns,'' said Bert
Winemiller, chief executive of Houston-based PROS.

Previous suggestions to use data-mining software to sift through
corporate records have drawn opposition from civil rights advocates.

``The system will have to draw data on individuals but the profiles are
anonymous,'' said Mutch who conceded that ``there is a trade-off between
security and privacy, there's no question.''

Some experts have endorsed the application of the technology, which
found its first commercial application in programs that scan for
potential credit card fraud.

``In the 1980s, when the first model that screened for hijackers and
terrorists was designed, the sophisticated predictive technologies these
companies are bringing to bear on this glaring problem did not exist,''
said Joseph Del Balzo, former acting administrator of the Federal
Aviation Administration.

Mutch said HNC has earmarked about $10 million to develop new security
technology, including $4 million in government defense and intelligence
contracts. A month before the Sept. 11 attacks on the Pentagon and the
World Trade Center, HNC reached a three-year contract with the Defense
Department to develop a program that would identify outbreaks of
biological attacks by detecting patterns within bacterial DNA.

HNC's stock fell 49 cents on Thursday to $21.05, but has rallied back to
the level that it had held before the attacks, in line with a gain in
other security-related shares. The stock has lost almost 28 percent so
far this year.

HNC like many other technology companies has seen business slow and on
Thursday it said it expects third quarter earnings and sales to fall
below analysts' estimates, with revenues ranging between $58 million and
$59 million and operating earnings per share from 13 cents to 15 cents.

Analysts polled by Thomson Financial/First Call had estimated on average
the company would report earnings of 18 cents a share and revenues of
$60.5 million.

``I think everyone in the technology sector has been affected in the
third quarter and we're not an exception. We saw a lot of standstill and
we're going to adopt a very cautious guidance going forward,'' he said.