News Analysis: Baltimore Fights for Survival as Losses Hit Pounds 550m ; Troubled Internet Security Company Hopes Radical Restructuring Will Restore Fortunes before Cash Runs Out

By Vaughan-Adams, Liz | The Independent (London, England), August 23, 2001 | Go to article overview
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News Analysis: Baltimore Fights for Survival as Losses Hit Pounds 550m ; Troubled Internet Security Company Hopes Radical Restructuring Will Restore Fortunes before Cash Runs Out


Vaughan-Adams, Liz, The Independent (London, England)


IN SPRING last year Baltimore Technologies, the Dublin-based internet security software company, briefly had a place in the FTSE 100 index and a value of around pounds 7bn.

A Nasdaq-listing in the autumn of 1999 had given it some $160m (pounds 110m) to play with and, thanks to the internet boom, its shares hit a high of pounds 13.75 in March of last year.

The logic behind investing in Baltimore was clear. Its software enabled customers to identify other users online and could also restrict what functions they were allowed to carry out, perfect for sending sensitive documents via the internet as well as for carrying out monetary transactions. Since the internet was booming, more companies would need the kit, so the logic ran.

Even Bill Clinton used it when the former US president and Bertie Ahern, the Irish Prime Minister, "digitally" signed a document using Baltimore's technology at a special ceremony in Dublin in 1998.

But today, Baltimore's dreams lie broken. The company is worth around pounds 122m and its shares, at 23.75p, are close to their lowest point ever and it has just pounds 54m of cash left. Oddly, the only company to have surfaced as a predator was Chantilley, a privately-owned London-based company with just 20 workers.

So far this year Baltimore has issued two profit warnings, admitted that revenues for the fourth quarter of last year and the first quarter of this year were overstated, and parted company with Fran Rooney, its chief executive, as well as a string of other key staff.

It now plans to delist its shares from the main Nasdaq exchange to the over-the-counter market and is looking for buyers for Content Technologies, a business whose software sweeps e-mails for viruses which it bought 11 months ago in an all-share deal worth around pounds 525m.

The resignation of David Guyatt, Content's founder and chief executive, in May was also a sure sign that all was not well, although he has since been re-employed albeit in a non-executive capacity.

As if all of that wasn't bad enough, Baltimore's results for the three months ended 30 June, reported yesterday, revealed a whopping pre-tax loss of nearly half a billion pounds, after a pounds 389m goodwill write-off charge mostly relating to the purchase of Content. In the same period last year, pre-tax losses totalled pounds 13.4m.

The company's underlying, or Lbitda, losses came in at pounds 23.7m compared with losses of pounds 4.4m last time.

Sales for the second quarter totalled pounds 16.5m, pretty much static on last year's figure, although the company's gross margin dropped dramatically to 47 per cent from 64 per cent in the second quarter of last year. It blamed the fall on a greater proportion of its sales coming from services rather than the more lucrative licensing.

Investors will surely be kicking themselves that they did not pay more attention when Mr Rooney and Henry Beker, the company's former chairman and head of Zergo with which Baltimore merged in 1998, cashed in. They both sold 1 million shares at 580p in May last year, netting them pounds 5.

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