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Andrew T. Gillies is Director of Communications at the Center for Audit Quality, an affiliate of the American Institute of CPAs, in Washington, DC. Based in Washington since 2002, he has also worked in editorial and communications roles at the Investment Company Institute, the World Bank, Forbes, and Vault.com. His policy-themed writing has focused on aerospace and defense, energy and environment, transportation, and financial services.

Wednesday, July 26, 2006

Weighing SafeNet's Dangers

WASHINGTON, D.C. - A wary analyst community awaits SafeNet's second-quarter financial results, set for release Wednesday evening. The last four earnings announcements from the Belcamp, Md., information security concern have fallen short of Wall Street expectations, and at a recent $15, the stock has lost three-fifths of its value since a high set in October.

Adding to the gloom: the overhang of an investigation by the Securities and Exchange Commission into SafeNet's stock option grants. The company got a related subpoena last May.

With the slide in its stock price, SafeNet's $364 million market value is now well below its book value, while its price-to-sales multiple is 1.4. The North American technology sector as a whole goes for 1.6 times revenues. Contrarian investors, particularly those interested in government contracting plays, may want to take a gamble on this beaten-up stock.

Full story at Forbes.com