Litronic Inc. of Irvine, Calif., said it has obtained a $500,000 order from the Department of Defense's Financial Management Service for a digital authentication system based on smart cards.

The contract follows one for $325,000 announced last month by Datakey Inc. of Minneapolis from a U.S. government agency that was not disclosed for security reasons. Datakey is supplying 10,000 microprocessor chips with its Cryptographic Card Operating System.

The sales indicate a growing acceptance of chip cards for high-security government uses, which advocates of the technology expect to strengthen its credibility in the private sector.

Litronic, an Internet security and public key infrastructure, or PKI, encryption specialist, said it is supplying digital signature capabilities for an initial 1,400 new users in a Defense Joint Accounting System procurement and electronic commerce program.

Litronic had already supplied the digital signature capability for $27 billion of transactions over four years, and vice president of product development Bob Gray said more business could be on the way. He said a "technology refresh" of a Litronic system used by 30,000 Army Corps of Engineers personnel could lead to a $10 million contract.

"Once complete, the new system will create a ripple effect among government suppliers" as digital signatures become standard for paperless transactions, Litronic said in a statement.

Datakey, which is to deliver half its order by yearend, said it indicates there is strong demand for chip technology that meets the high-level certification requirements of Federal Information Processing Standard 140-1, Level 3, which Litronic is also serving.

"Secure access and transfer of information" are top concerns in the government sector, said Datakey president and chief executive officer Carl Boecher. "This order reflects a continuing relationship with this agency and demonstrates Datakey's commitment to providing top-notch information security solutions."

As a hardware authentication device, the chip card with Datakey operating system can perform sophisticated cryptographic operations. Mr. Boecher said the system, though specialized and proprietary, has built-in flexibility. "It opens the door for the practical development of a secure multipurpose smart card," he said.

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