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    Stock Alert for Wave Systems Corp. (WAVX)

    Wave Systems Corp. (WAVX) develops, produces and markets products for hardware-based digital security, including security applications and services that are complementary to and work with the specifications of the Trusted Computing Group (TCG), an industry standards organization comprised of computer and device manufacturers, software vendors and other computing products manufacturers. Specifications developed by the TCG are designed to address a broad range of current and evolving digital security issues. These issues include: identity protection, data security, digital signatures, electronic transaction integrity, platform trustworthiness, network security and regulatory compliance.

    WAVX was founded in 1988 and is based in Lee, Massachusetts.

    Share Statistics (10-Jan-11) FY

    2008

    FY

    2009

    %

    Chg

    Q3

    2009

    Q3

    2010

    %

    Chg

    Symbol WAVX Revenue, $Mn 8.81 18.89 114.4% 4.84 6.70 38.4%
    Current price $4.45 Gross marg. 90.7% 92.6% 2.1% 93.8% 92.7% -1.2%
    52wk Range: $1.65-$4.75 Oper. margin -17.6% -17.5%
    Avg Vol (3m): 430,648 Net margin -233.3% -17.7% -92.5% -9.9% -17.6% 77.8%
    Market Cap. 361.18M
    Shares Outstanding 81.13M EPS, $ -0.37 -0.05 -86.5% -0.01 -0.01 0.0%

    Source: Reuters.com, SEC Filings.

    Financial Summary

    WAVX’s third quarter of 2010 net revenues rose 38% to $6.7 million versus $4.8 million in third quarter of 2009, attributing the results to continued growth in enterprise software license sales, as well as increased shipments of its software bundled with enterprise PCs featuring a Trusted Platform Module (TPM) security chip and/or a self-encrypting drive (SED).  Third quarter of 2010 net revenues also rose 4% over second quarter of 2010 net revenues of $6.5 million.  Total billings increased 19% to $6.2 million in the third quarter of 2010, compared to total billings of $5.2 million in the third quarter of 2009, and declined 3% versus the second quarter of 2010 total billings of $6.3 million.

    WAVX’s R&D expense rose versus the second quarter of 2010 and third quarter of 2009 as the Company developed new products and addressed expanded engineering and product development requirements for a broader base of supported OEM products and OEM partners.  Third quarter of 2010 SG&A expense also increased as compared to the third quarter of 2009, however, WAVX was able to reduce SG&A by 7% versus the second quarter of 2010 levels.

    As a result of higher SG&A and R&D expense, the Company’s third quarter net loss increased to $1.2 million, or $0.01 per basic and diluted share, compared to a third quarter net loss of $0.5 million, or $0.01 per basic and diluted share, and the second quarter of 2010 net loss of $1.0 million, or $0.01 per basic and diluted share.

    WAVX’s cash and cash equivalents rose to $4.9 million as of September 30, 2010, compared to $4.5 million on June 30, 2010.  As of September 30, 2010, its total current assets declined to $8.4 million as compared to $8.5 million at June 30, 2010, and its total current liabilities were $7.1 million, including $2.6 million of deferred revenue, at September 30, 2010, as compared to $7.1 million, including $3.1 million of deferred revenue, at June 30, 2010.

    Source: http://www.wave.com


    Financial Strength (11-Jan-2011) Company Industry Sector S&P 500
    Quick Ratio (MRQ) 1.14 1.14 0.65
    Current Ratio (MRQ) 1.19 2.97 2.18 0.97
    LT Debt to Equity (MRQ) 4.89 18.21 14.66 121.21
    Total Debt to Equity (MRQ) 7.28 25.37 23.24 178.17
    Interest Coverage (TTM) -137.09 0.48 1.46 16.23

    Source: Reuters.com, SEC Filings.

    Analyst Consensus

    This is the consensus forecast among one polled investment analysts. Against the Wave Systems Corp. company.

    Analyst Detail Buy Outperform Hold Underperform Sell No Opinion
    Latest 1 0 0 0 0 1
    4 weeks ago 1 0 0 0 0 1
    2 months ago 1 0 0 0 0 1
    3 months ago 1 0 0 0 0 1
    Last year 0 0 0 0 0 1

    The one analyst offering a 12-month price target expects WAVX share price to rise to 6.00 in the next year from the last price of 4.01.

    Source: markets.ft.com

    Consensus Estimates Analysis


    # of Estimates Mean High Low 1 Year Ago
    SALES (in millions)
    Year Ending Dec-11 1 45,750.00 45,750.00 45,750.00
    EARNINGS (per share)
    Year Ending Dec-11 1 0.21 0.21 0.21

    Sales and Earnings Figures in U.S. Dollars (USD)

    Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=SIRI.O


    Investment Highlights

    WAVX is a pioneer in hardware-based PC security that provides software to help solve critical enterprise PC security challenges such as data protection, strong authentication, network access control and the management of these enterprise functions.

    The Company is a founding member of the Trusted Computing Group (TCG), a consortium of more than 100 companies that forged open standards for hardware security.

    WAVX’s EMBASSY® line of client- and server-side software leverages and manages the security functions of the TCG’s industry standard hardware security chip, the Trusted Platform Module (TPM) as well as hard drives that comply with TCG’s “Opal” self-encrypting drive (SED) standard.  Self-encrypting drives are a growing segment of the data protection market, offering increased security and better performance than most existing software-based encryption solutions.  TPMs are standard equipment on many enterprise-class PCs shipping today and have shipped on an estimated 300 million PCs worldwide.  Using TPMs and/or SEDs and Wave software, enterprises can substantially and cost-effectively strengthen their current security solutions.

    The Company reported the following recent progress/developments:

    -Introduced Wave for BitLocker Management, simple-to-use central management for BitLocker that can reduce the cost and complexity of deployment, and activates a Trusted Platform Module for protecting keys and recovery passwords. BitLocker is a component of the new Windows 7 operating system.

    -SHI International Corp. T/A SHI UK entered a Resale Agreement with WAVX on Sept. 30.  The agreement allows SHI to resell the Company’s products to its customers and OEM partners in EMEA and Asia Pacific.

    -Launched EMBASSY Remote Administration Server 2.0 (ERAS 2.0). ERAS 2.0 is also available as a managed service—a good option for customers who lack IT resources or for enterprises adopting a Cloud computing model.  New features include improved reporting (showing self-encrypting drives under management or those that have been erased, for instance) and support for non-domain clients.  Additional capabilities include remote access recovery (administrators can now supply single-use recovery passwords to users who’ve forgotten their password) and automated, no-touch deployment of TPMs.

    -WAVX customer Boston Medical Center (BMC) earns EHR Game Changer Award from Health Data Management Magazine related to its deployment of hardware encryption managed by the Company’s ERAS.  BMC spoke on the benefits of deploying managed hardware encryption using WAVX’s solution at the Forrester Security Forum in September.

    -Seagate Self-Encrypting Laptop Hard Drive Secures Key U.S. Government Certification. Seagate’s Momentus® Self-Encrypting Drive earned FIPS 140-2 certification from the U.S. National Institute of Standards and Technology (NIST). FIPS certification is required for government and other organizations to be able to deploy these drives.

    -Open Identity Exchange (OIX), the First “Trust Framework” Authorized by the U.S. Government, Certified Wave’s Online Identity Service for Secure Authentication to Government Websites.  WAVX’s identity service, id.wave.com enables strongly authenticated, single sign-on to web services and applications in the cloud.

    -WAVX executives presented at the Inaugural National Security Agency (NSA) Trusted Computing Conference and Exposition in September. The conference attracted nearly 500 attendees.  Exhibitors and presenters, including WAVX customer PricewaterhouseCoopers, reviewed ways Trusted Computing solutions can be cost effectively implemented to substantially enhance data and network security.

    -WAVX and LynuxWorks demonstrated management and support for Self-Encrypting Drives (SED) in a Secure Virtual Environment at the NSA Conference.  Also that week, Digital Management announced it became a certified solutions partner for WAVX, agreeing to make the Company’s trusted computing solutions for cyber security available for its clients.

    -At Intel Developer Forum 2010, the Company demonstrated the Use of Intel® Core™ vPro™ Processors for Secure Authentication from the PC to the Cloud.  The Company showed a wide range of security capabilities in development, including device-based authentication to secure the client PC, secure remote access to the corporate domain, and strong, hardware-based federated access to both corporate and public cloud services.

    Recent Company News

    WAVX shares were boosted yesterday on report that the Obama Administration is planning to announce plans for an Internet identity system that will limit fraud and streamline online transactions. The stock managed to reach a day high of $4.59 before settling at $4.45. WAVX is currently trading at its 50-day and 200-day moving averages of $3.32 and $2.80, respectively.

    WAVX late last month announced it has received $5.2 million in additional license and maintenance orders through its PC OEM partners on behalf of a U.S.-based automotive company. According to the Company, the orders hasten the deployment and increase the total value of the automaker’s software orders to $10.9 million, $6.7 million of which will be recorded as revenue over the next 12 months, $1.9 million of which was recorded as revenue in 2010 and $2.3 million of which is expected to be recognized as revenue in 2012 through 2014.

    “We’ve received positive feedback from this large customer and their IT group about the benefits our solution provides for ease of use, deployment and scalability,” Brian Berger, WAVX EVP of marketing & sales, said in a statement.

    Source: http://www.wave.com/

    Technical Analysis

    Source: http://stockcharts.com

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Jan10-2011 symbol Share, $ $ Mn 2010 2011 2010 2011
    EMC Corp. EMC 23.72 48.87B 18.98 16.47 2.89 2.59
    CA Inc. CA 24.51 12.54B 12.70 11.78 2.79 2.66
    VeriSign Inc. VRSN 32.91 5.66B 27.89 22.09 7.24 7.33
    Symantec Corp. SYMC 17.05 13.24B 12.36 11.07 2.18 2.06
    Computer Peripherals Median 29.84 n/a 2.16 n/a
    Wave Systems Corp. WAVX 4.45 361.18M n/a n/a n/a n/a

    Source: Thomson Financial

    Insider Trading Activity

    NET SHARES PURCHSE ACTIVITY

    Inside Purchases – Last 6 Months

    Shares Transaction
    Purchases n/a 0
    Sales 50,000 2
    Net Shares Purchased (Sold) (50,000) 2
    Total Insider Shares Held 453.71K n/a
    % Net Shares Purchased (Sold) (9.9%) n/a
    Net Institutional Purchases — Prior Qtr to Latest Qtr
    Shares
    Net Shares Purchased (Sold) 5,573,820
    % Change in Institutional Shares Held 28.89%

    Source: Yahoo Finance

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