RSA Reports Weak Growth In Sales, Profits

RSA Security Inc. continues to experience weak growth in software sales, reporting modest gains in the second quarter ended June 30. Revenue in the quarter was $76.5 million, 1.2% higher than the second quarter of 2004. Net income was $8.5 million, 6% higher than a year earlier.

Art Coviello, RSA's president and CEO, said in a statement that the company is well positioned for a strong second half. The company closed the quarter with a $62 million backlog in orders and deferred revenue. He also pointed to the RSA SecurWorld partner program and new authentication products as drivers for positive business results the rest of the year.

A financial analyst thinks the weak growth was caused by a slowdown in large deals tied to products like ClearTrust Web-access-management software. "Now all eyes are on the company's authentication business, its bread and butter, and the forecasting looks well for that business," says Gregg Moskowitz, a financial analyst at Susquehanna Financial Group, an institutional brokerage, research, and trading firm. "The second quarter was respectable, though not spectacular. But this should set up better RSA performance the rest of this year and for 2006."

RSA will face greater competition in the authentication market from companies such as VeriSign Inc., he says. But he thinks RSA's brand awareness and powerful distribution system will keep it at the top of the market. However, Moskowitz says, "we should see greater price degradation from the competition moving forward."