CUInHawaii (61.98)

GlobalScape is Well Positioned for a WikiLeaks Investment

January 07, 2011 – Comments (0) | RELATED TICKERS: GSB

I have owned this stock for a couple of years.  David Gardner once posted about it as well.  This company is in the business of secure file transfers over the Internet, or more generally, secure data tranmission over the Internet.  Historically their revenue has come from ISPs and web designers who use their CuteFTP software to update web sites.  However, over the past few years they have done the necessary work to achieve the security certifications for government use.  A couple years ago they received a large purchase from the US Army, but this hasn't turned into the ongoing cash-flow that it could be.

Companies have traditionally used WANs (wide area networks) to connect remote offices.  These are built using private leased lines and leased satelite links.  I theorize that younger companies are more likely to leverage the Internet as the WAN.  Thus they need solutions like VPNs, firewalls, anti-virus, anti-spam, and secure file transfers to protect their data.  GlobalScape has solutions for many of these and all of it fits within their area of expertise.

I am generally bearish on defense spending as I think our global police operations will continue to wind down as reducing national debt becomes increasingly important.  However, I am extreamly bullish on network security spending especially considering the WikiLeaks scandals.  I can't imagine congress or the pentagon doing anything other than increasing spending in this area.
GlobalScape may be in a position to benefit from this.  It won't take a very large contract with the government to double or triple this tiny company.  During the past two years they have been repositioning themselves for this exact trend.

Highlights:

- No debt

- Heavy R&D spending over the past couple years on new and unannounced products

- Named among the "Top 50 places to work" in San Antonio

- New CEO in 2008 has extensive government and government contractor experience (Military Intelligence and worked for General Dynamics)

-Robert
Long GSB.  I have no affiliation with GSB.