Security First Technologies reached a pinnacle last week, and not just in its stock price.
It got new funding, new customers, and some of those ever important strategic allies.
The Atlanta company, known as S1, announced a marketing alliance to promote its software with Hewlett-Packard Co. hardware. The relationship includes a $10 million equity investment.
S1 also entered into a development deal with Andersen Consulting, which says it has close ties to 70% of the world's financial institutions and 12,500 consultants ready to recommend the vendor.
Security First also landed its largest software licensing deal to date: $50 million over five years from Royal Bank of Canada, which said it hopes to offer Internet banking to as many as 40% of its 10 million retail accounts by the end of 2004.
S1 rose on the stock market 36% last week, to $65.625 a share.Its most recent low was $9.25, on Oct. 8.
"From a stock and from a company perspective, this is a long way from where they were two years ago when they were struggling to get new products out," said Stephen C. Franco, analyst at Piper Jaffray Inc., Minneapolis. "They have staying power, they have financing, they have the brand name, and a customer base."
Royal Bank of Canada - which last year bought the bank, Security First Network Bank, that was originally affiliated with S1-expects to be offering full-service Internet banking within 18 months.
The Toronto bank's deal includes incentive warrants to buy up to 400,000 shares. For example, for every one million Canadian customers that become Internet users, Royal will buy 100,000 shares of Security First at $60 each.
"This is phenomenal," Mr. Franco said. "There is no downside. If they miss the mark, there is no penalty. They just don't get the warrant."
"We looked closely at other alternatives," said Martin Lippert, Royal Bank's vice chairman and chief information officer, "and believe that S1's experience and technology will enable us to meet the anticipated high customer volumes and increased demand for integrated financial products and services."
Royal Bank, which paid $13 million plus $7 million in licenses and investments for Security First Network Bank, will continue operating its U.S. business through the S1 data center.
Mr. Franco said the recent fortunes of Security First reflect the prospects of Internet banking for the next several years.
According to an Office of the Comptroller of the Currency report, 4.2% of the 8,980 U.S. commercial banks offer transactional Internet capabilities. But those that do are predominantly larger institutions that account for 40% of bank assets.
"The level of commitment is clearly there," said Joel Friedman, managing partner of Andersen's global banking business. "Within two years, virtually all of the top 100 retail banks will offer Internet banking."
Andersen Consulting will provide much-needed assistance to Security First's staff, which had been stretched thin to meet customers' software development, outsourcing, and systems integration demands.
S1 has more than 100 financial institution customers, including 14 of the largest 100 in this country.
Security First officials were on Cloud Nine after the announcement of the Royal Bank deal. Royal Bank is one of 12 equity owners-among the Citigroup, State Farm Insurance, Wachovia Corp., and Huntington Bancshares- that own 25% of S1.
"Banks that have stood by us, our vision, our plans, and data center have received enormous profits," said James Mahan 3d, chief executive officer at Security First.