Entrust Inc., which suffers from being the market leader in a market that is drying up, has been working hard to branch out and reinvent itself.
The Dallas company has historically specialized in public key infrastructure, a system that uses digital keys and certificates to encrypt data and authenticate users of Web sites. Though some once had great hopes for PKI, banks ultimately found few applications for the heavy-duty technology.
To combat this, Entrust has been embedding its PKI technology in products that it hopes will prove more immediately relevant, including ones aimed at securing e-mail, corporate networks, and Web portals. During a 100-day period beginning last spring it made more product announcements than it had in its 10-year history, and executives are barnstorming the country to deliver their new message.
"We're transforming our solutions and our products," said Leah MacMillian, the vice president of secure desktop solutions. "The way we sell to our customers is really on a solutions basis." The idea is to offer products that meet existing needs, rather than ones that propose answers to theoretical problems.
In contrast to other industries, where issues are specific - patient privacy in health care, information security in government - the banking industry's data-security needs are diverse, Ms. MacMillian said.
ING Direct of Wilmington, Del., part of the Dutch financial services giant ING Group NV, is using Entrust's technology to secure online forms as it moves away from paper and to a system that uses Adobe Acrobat document-management software, Ms. MacMillian said. Egg PLC, the British online bank that is majority-owned by Prudential PLC, uses Entrust's technology to secure its Web site and to provide access for customers, she said. Royal Bank of Scotland uses it in its online banking program and to secure internal e-mail.
According to Gartner Inc., Entrust had 40% of the worldwide PKI market in 2001, the most recent year for which the research firm has a measurement of that market. A managing vice president at Gartner, Victor S. Wheatman, said Entrust had to change its business model, and he called PKI "last year's dirty laundry."
For the most part passwords suffice in such tasks as authenticating customers online; public key encryption has come to be considered overkill, Mr. Wheatman said. "In order to survive, PKI has to disappear into the applications that absolutely, positively have to have it," he said.
By expanding beyond PKI, Entrust is taking difficult but necessary steps, Mr. Wheatman said. "They seem to have enough money in the bank to effect a transformation."
The company has not made a profit since 1999, but it said in its midyear earnings report in July that it was on track to break even by yearend. Its shares, which peaked at $150 in the first quarter of 2000 during the Internet boom, closed Friday at $4.95, up 20% for the week.
Meanwhile, Entrust's chief competitor in the PKI business, Baltimore Technologies PLC, has been selling operations to get critically needed cash.
Bijan Khezri, the London company's chief executive officer, said in an announcement last Tuesday: "We will continue generating cash through divestments and further reduce the cash burn of existing operations. We will not tolerate any operational cash burn beyond the end of the year and are prepared to deploy all available means to maximize value for our shareholders."
The piecemeal selling started earlier in the year after Baltimore Technologies failed to find a single buyer for the whole company. Mr. Wheatman said Baltimore Technologies is "falling apart."
