[Clips] nCipher sees silver linings as SafeNet abandons its bid

[R. A. Hettinga]

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  Delivered-To: clips at philodox.com
  Date: Fri, 7 Apr 2006 11:54:27 -0400
  To: Philodox Clips List <clips at philodox.com>
  From: "R. A. Hettinga" <rah at shipwright.com>
  Subject: [Clips] nCipher sees silver linings as SafeNet abandons its bid
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  <http://www.siliconfenbusiness.com/index.php?articleid=107>

  Silicon Fen Business Report
  One-stop news on the Cambridge High Tech Cluster

  nCipher sees silver linings as SafeNet abandons its bid
  7th April, 2006


  By a staff writer

  It's a back-handed compliment for a growing business to be referred to the
  Competition Commission. To be seen as a potential dominant force in the
  market and hence a threat to competition means it must be doing something
  right.

  It also has the virtue of drawing attention to the firm as an undoubted
  player of substance.

  These are the bright points that IT security specialist nCipher plc (NCH.L)
  seems to have drawn from the withdrawal of the recommended bid by US-based
  SafeNet Inc, who on 8th February offered #86m for the firm.

  When on 30th March, after preliminary investigations, the Office of Fair
  Trading referred the proposed takeover to the Competition Commission for a
  full UK regulatory anti-trust/competition review, it automatically
  triggered a lapse clause written into the terms of the offer.

  Today SafeNet said it will not proceed with the offer. It cited the OFT
  comments about the competitive position of the two companies - that the
  deal would bring together two of the largest suppliers of Hardware Security
  Modules which may lead to customers facing higher prices and a loss of
  innovation - and the time, cost and potential disruption to business that
  could ensue from a referral.

  In acknowledging SafeNet's decision, nCipher's directors agreed with that
  assessment and issued a forward looking statement explaining the broad
  strategy for continuing as "as an independent entity".

  Growth opportunities

  IT and Internet security - nCipher's core area of expertise - have become
  big issues in organisations. The Cambridge-based firm applies cryptography
  to the problems of identifying people and protecting their data, their
  businesses, and the transactions which occur between them.

  The nCipher Board there are "good growth opportunities" in their markets to
  build on the strong performance in 2005 which their growing portfolio of
  products and services "put us in an excellent position to exploit". It will
  now focus on those prospects and on further operational improvements.

  While the company did draw some perverse comfort from the referral to the
  Competition Commission, it said "the very high regard in which customers
  hold nCipher, its products and its after-sales service has also been
  emphasised to us by the consultation process".

  The Board intends to build on this brand loyalty and said it has the full
  commitment of the executive team. CEO Alex van Someren (pictured) had been
  due to leave following the takeover, though not co-founder and Chief
  Technical Officer Nicko van Someren.

  Share price 24% above pre-bid

  It remains to be seen how the stock market reacts once analysts have
  re-evaluated nCipher's stand-alone prospects. Given that SafeNet's offer
  was at a considerable premium - either 36% or 52%, depending on where you
  start measuring - the share price was always going to come off the 300p
  offered.

  At midday it was trading at 245p, 24% above the 197.5p of 19 January, the
  last day prior to the move up that triggered, five days later, the
  announcement by nCipher that it was in talks which could lead to an offer.
  That news left the price at 220.5p.

  nCipher expects to release results for the first quarter ended 31 March on
  23 May when we should see whether the offer had an impact on trading. When
  releasing the full year results in late February, Mr van Someren said
  "uncertainty created by the SafeNet offer may have a short-term impact on
  revenues".

  Meanwhile at SafeNet

  SafeNet said its chief financial officer was leaving the company
  immediately and that it was booking costs of $600,000 for the lapsed offer
  in the first quarter.



  --
  -----------------
  R. A. Hettinga <mailto: rah at 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'
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-- 
-----------------
R. A. Hettinga <mailto: rah at 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'