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[] IT-Sicherheitsfirmen profitieren nicht wie erwartet,

Chicago Tribune, Sep. 10, 2002

Cybersecurity firms not profiting as expected

CHICAGO - Not long after last year's terror attacks, Tony Maier's phones
at RedSky Technologies Inc. were ringing with inquiries about the
company's "E-911" software, which pinpoints locations of employees
dialing for help from inside large buildings.

The Chicago company's sales continue to grow, but they've not met the
expectations raised by a surge of interest in security and safety
technology after the attacks.

"It's not something people threw money at and then forgot about," said
Maier, founder and chief executive officer of RedSky. "Awareness is a
lot higher than before, but people aren't rushing in with slap-dash
approaches. They're taking a measured approach."

A year after the attacks, the anticipated wave of investment in a wide
range of technologies to protect people, buildings and computer networks
has yet to swell, let alone crest, experts say.

Concern hasn't gone away, but the economic downturn and the complexity
of responding to a terrorist threat is inhibiting investment.

"It's like a double-whammy tragedy," said Howard Rubin, executive vice
president at Connecticut-based research firm Meta Group. "Companies had
planned to spend more, but the money simply wasn't there to do a lot of
the things that had to happen over the past year."

For instance, experts had forecast a 70 percent increase in spending on
network security in the year after the attacks. Yet spending increased
less than 20 percent because corporate information-technology budgets at
cash-strapped companies continued to shrink as a percentage of sales,
according to Rubin's research.

"There's been no material increase in sales due to 9-11 so far," said
Israel Hernandez, senior research analyst for Internet security at
Lehman Brothers Research Inc.

Longer term, Hernandez and others say, Sept. 11 will have proven an
important catalyst for growth in spending to secure networks that
operate telecommunications and energy systems and critical information

"We're just not there yet," Hernandez said.

The White House is finalizing a plan scheduled for release next week by
President Bush's cybersecurity adviser, Richard Clarke, outlining ways
to protect government and industry networks against viruses and

Clarke, director of the Office Cyberspace Security, chairs the
president's Critical Infrastructure Protection Board. His office was
working with industry groups on the plan long before Sept. 11.

The White House has requested stepping up federal spending on
cybersecurity by 64 percent, to $4.2 billion in fiscal 2003 compared
with the current year.

"Going forward, I suspect you'll see substantial jumps in federal
spending," said Harris Miller, president of Virginia-based Information
Technology Association of America, a leading trade group.

One of the bigger issues will be finding additional sources of money to
help hard-pressed state and local governments improve their networks,
Miller said.

In the corporate arena, network security is one of the few growth areas
in information technology.

Sales of 14 of the larger publicly traded Internet security companies
increased 7.7 percent in the first half of 2002, according to a Lehman
Brothers survey. For the same period, sales for a broad index of public
software companies declined 9.5 percent.

"Security spending is holding up much better than other areas of
enterprise software," Hernandez said. "Given the heightened awareness,
security remains a relatively nondiscretionary item when compared with
other software categories."

Biometrics firms anticipated similar growth spurts following the terror
attacks. The firms make technologies to identify people using unique
physical characteristics, such as fingerprint, eye and facial scans.

Like network security stocks, biometrics' issues soared, then lagged the
broader index when sales didn't materialize.

A year ago, Joseph Atik, chief executive officer of Visionics Corp., now
Identix Inc., was answering questions in closed-door sessions with
federal officials about mass deployment of biometric systems at
airports. The Minnesota-based company makes fingerprint and facial
recognition technology.

Visionics' stock nearly doubled on Sept. 17, the day the markets
reopened after the attacks. Identix now trades in the $7 range, above
its $3.85 low for the year but well below its $15.74 high.

"We are seeing (sales) growth," Atik said, "but less than one would have

New laws passed since Sept. 11 include measures that will require
increased spending.

Among them is the Visa Reform Act, which requires creating a terrorist
watchlist and database and requiring a biometric identifier - such as a
fingerprint - from foreign visitors. U.S. entry ports must install
equipment and software capable of reading the new visas by October 2003.

While investors have been disappointed, citizens can take comfort in
knowing that security is a much higher priority. Still, Miller and
others say government and industry have a long way to go.

"Money to buy the technology is an important starting point," he said.
"But you also need to focus on the people and the processes.
(Precautions) should become routine, the same way a commercial
building's security is routine.

"We're not there yet with information security," Miller said. "There are
still too many vulnerabilities."

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