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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