The Internet has replaced the phone book, it has replaced the good ole newspaper on your doorstep, replaced the shopping mall and even replaced your weekly trip to see your banker. However all this convenience has come at a price - for some higher than others. For all the ways that the Internet has made our lives easier, it brings with it a slew of potential breaches.

Enter - Enigma Software Group's (OTCBB: ENGM), highly successful product Spyhunter. With the Internet posing new possible threats on a seemingly daily basis, the market for a product like Spyhunter has never been stronger. And as a result, it looks like ENGM is poised for yet another consecutive quarter of record revenue growth and impressive gross margins.

Announcing earlier this week that both initial and renewal subscriptions for the company's anti-spyware solutions are up 412% and 67% respectively during the first 9 months of 2007 over 2006; Enigma should be tallying its 5th straight quarter of record sales and 100% gross margins during the third quarter of fiscal 2007.

New York Times a Big Fan

For us here at MSP, this does not come as much of a shock. With nearly 80% of all PCs infected with some type of spyware and Enigma offering one of the most innovative and effective solutions available on the market today, it is only a matter of time before this stock reflects the inner success of this company. Selling an average of $90,000 worth of product each week ( +/- 3,000 units @ $29.95) ENGM is on the launching pad and ready for take off. And it is not just us investors that are taking notice of the success of the Spyhunter product. The New York Times - a market mover in itself - has also caught wind of the product and specifically and solely mentioned the Enigma product it in a recent write up.

For those of you that missed it, the company's products received a ringing endorsement from the New York Times on September 13th in an article entitled Cleaning Out the 'Cleaners'. One of Enigma Software's anti-spyware websites, www.spywareremove.com, is the first one mentioned and the only linked product in the article. How about that for an endorsement?

Tackling Spyware Head On

As spyware programs become increasingly sophisticated in a very dynamic manner, Enigma's approach to tackling the issue is proving to be a winner. By employing a multi-faceted strategy that encompasses both responding to customer queries regarding new potential breaches and making a concerted effort to identify and eliminate all new possible spyware threats, ENGM has been able to grow its customer base like gangbusters over the past nine months.
As of the their Q2 2007 filing, ENGM lists a mere 4.6 million shares outstanding, with 1st half revenues coming in at $1,370,000. Annualizing revenues, and assuming zero growth for the remainder of '07, Enigma brings in an impressive $0.60 per share in revenues.

Are Current Sales Just the Tip of the Iceberg?

With research conducted by McAfee and the National Cyber Security Alliance (NCSA) indicating that US consumers have their heads in the sand when it comes to computer security, the market for Enigma's products may still be in its nascent stage, although it certainly appears otherwise with all of the hoopla today surrounding the topic in the news.

The study finds that although nearly three quarters of US consumers think that they have optimally installed anti-spyware software, just over one-half actually had it running. To make the study even more interesting, only 22% were found to have had installed a full package of a running firewall, anti-spyware and reasonably up-to-date anti-virus software.

As more and more consumers wake up and realize the potential damage to be done by spyware, whether it is in the realm of identity theft or a computer malfunction, demand for a solution that interfaces directly with the user to find and eliminate their specific problem will surely rise. Who needs a solution in a box when you have a human operator to assist you in your moment of computer security need?

We see ENGM reaching the $0.50 range in the near term and $1.00 for those with longer positions

Labels: Engima Software Group Inc., ENGM, Spyhunter