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In Entrust B2B Trusts

The future of B2B commerce looks particularly bright, as has been evidenced by such rocketing companies as Ariba (ARBA) and Chemdex (CMDX).

However, there is a serious threat to the growth: security. After all, in the B2B space, companies are exchanging confidential information over the Net infrastructure. If in the wrong hands, the consequences could be devastating.

So, as the need for B2B grows, so will the need for security. One company that should benefit is Entrust (ENTU).

The company, a spin-off of Nortel Networks (NT) , is a leader in the enterprise public key infrastructure (PKI) industry. The technology is quite complex. Basically, think of it as a digital driver's license, that is, a means of identification. Entrust uses encryption technology to ensure security with electronic transactions -- mostly for the enterprise environment.

The company's financials have been tremendous. In its latest quarter, the company generated sales of $22.6 million, which was up from $13 million in the same quarter a year ago. The sequential growth rate was 14 percent.

Customers include the FDIC, Citibank, JP Morgan, NY Life and NASA. NY Life is using Entrust to allow for secure communications with 16,000 agents and brokers across the country. Even after paying Entrust, the cost savings are estimated to be $200,000 per month.

But, the most amazing thing: The company is profitable. Net income in the latest quarter was $2 million, which compares to a $1.6 million loss in the same period a year ago.

Of course, a big growth area for B2B commerce is wireless. According to International Data Corp (IDC), there will be more Net appliances sold than PCs by 2005. Entrust is already there with new technology that will meet the Wireless Application Protocol (WAP).

It has announced a major e-business initiative for wireless, teaming-up with such companies as Nortel, 724 Solutions, Sonera and Nokia.

Of course, there is competition, especially from VeriSign (VRSN) . But the market appears to be big enough for more than one player. VeriSign has a market capitilzation of $9.5 billion, whereas Entrust has a market capitalization of a mere $1.6 billion.

With such growth, it is hard to believe that the stock has been languishing around $38 per share. The problem? Management has been reticent. It's almost impossible to move a stock unless there is visibility. Fortunately, the company has announced it will be more aggressive with its message. So should the stock price.


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