CyberGuard Still Stalking Targets

Security vendor CyberGuard Corp. (Nasdaq: CGFW) posted its second-quarter results today, reporting revenues of $16.5 million, 47 percent up on the same quarter last year and just above analyst estimates of $16.38 million (see CyberGuard Reports Q2).

However, on a GAAP basis, earnings per share were 3 cents on a net income of $1 million, down from 8 cents per diluted share on $2.3 million for the same quarter of the previous year. This just missed analyst estimates of 4 cents.

The figures reflect recent acquisition activity from CyberGuard. The company, which appears to be on a mission to snap up other security vendors, picked up content security firm Webwasher AG last year and Linux specialist SnapGear in late 2003 (see CyberGuard Acquires Webwasher).

Speaking on a conference call earlier today Pat Clawson, CyberGuards CEO, was bullish about the Webwasher acquisition, despite its impact on earnings. “We did sacrifice some earnings in the near term, but there is no doubt that it was the right move for us,” he said.

Clawson pointed specifically at the cross-selling opportunities presented by the deal, particularly in Europe. Webwasher channels in Germany have already helped CyberGuard to double its firewall sales in the country, he claims.CyberGuard has clearly got faith in the acquisition route. The company hit the headlines last year when it failed in its attempts to acquire Secure Computing Corp. (Nasdaq: SCUR). (See CyberGuard Locks Onto SCUR and SCUR Spurns CyberGuard Suitor.)

Undeterred, Clawson explained this morning that he is still eager to open up the company’s checkbook. The firm remains on the lookout for acquisition targets, which include vendors of firewall and content management products.

Nor would he dismiss the possibility of acquiring another Webwasher-style firm. “I would not lock myself in by saying that we would not consider another Webwasher acquisition -- if we find the right technology."

However Clawson confirmed that he would look for such a deal to be “immediately accretive.”

Clawson also gave an insight into the Boca Raton, Fla., firm’s product roadmap. CyberGuard will launch a new firewall appliance in its third quarter and is planning an upgrade of its TSP VPN product. This will offer “application-level security at breakthrough speeds."Building brand awareness is the next big priority for CyberGuard. Execs on the call said that the company will start a global branding campaign next month, which will be backed up by ads targeting CyberGuard’s competitors.

The market responded positively to today’s results: CyberGuard shares were up 21 cents (3.55 percent) to $6.13.

— James Rogers, Site Editor, Next-Gen Data Center Forum