Net revenue for Q3-2001 was $28.1 million compared with $43.8 million or a
36 percent decrease from Q3-2000. Revenues for the first nine months of 2001
are down 11 percent to $105.6 million from $119.1 million for the first nine
months of 2000. During the quarter, the Company incurred a pro forma net loss
of $2.6 million or $0.10 per diluted share compared with net income of
$4.6 million or $0.17 per diluted share in Q3-2000.
In the third quarter, Rainbow restructured and consolidated its operations
and took restructuring and other charges of $26.1 million. Net loss and
diluted loss per share on a pro forma basis excludes restructuring costs and
certain non-recurring charges such as inventory and receivable reserves,
write-off of capitalized software, goodwill and investment impairment, and
currency loss on repayment of inter-company loans. Including these charges,
$25 million of which were non-cash, net loss for Q3-2001 was $20.3 million, or
$0.78 per share compared with income of $4.6 million or $0.17 per diluted
share.
This was an extraordinarily difficult quarter for the Company in light of
today’s challenging market climate, but we believe the worst is behind us,
said Walt Straub, president and CEO, Rainbow Technologies. The Company has
instituted expense control measures to improve profitability and productivity.
While strong commitments from our government sector customers will drive
expectations for Q4-2001 and into 2002, other segments of our business are
more difficult to forecast. We believe the changes we have implemented will
better position our products and lead the Company to profitability.
Rainbow’s Secure Communications segment reported revenues of $14.9 million
for Q3-2001, up three percent from $14.4 million in Q3-2000. For the nine
months year-to-date, the Secure Communications segment is up 35 percent with
revenues of $50.6 million compared with revenues of $37.6 million a year ago.
This segment continues to record a strong backlog for products and the Company
anticipates this segment will grow between 10 and 15 percent in 2002.
For Q3-2001, Spectria reported revenues of $2.9 million, down 42 percent
from Q3-2000. Spectria’s year-to-date revenues were $11 million, down
27 percent from a year ago. Spectria’s operations were impacted by the
reduction in IT spending in Q3-2001 and deferrals of some projects into
Q4-2001.
In the eSecurity segment, the Company reported revenues of $10.3 million
in Q3-2001, down 58 percent compared with $24.3 million in Q3-2000. This was
due to continued softness in the OEM market for CryptoSwift SSL acceleration
devices and a downturn in demand for high end business application software,
PC hardware, and PC software. Additionally, certain significant iKey orders
were deferred to Q4-2001. Rainbow anticipates that both Sentinel and iKey
sales will return to Q2-2001 run rates. The Company has launched a new
channel program designed to sell eSecurity solutions through high-end
resellers and integrators, reducing the Company’s reliance on OEM customers
for revenue.
The Company expects revenues in the range of $30-32 million in Q4 2001 and
should return to operational profitability.
