Guidance Software, Inc. (NASDAQ:GUID)

CAPS Rating: No stars

The Company develops and provides software solutions for digital investigations.


Player Avatar NetscribeSoftwre (98.84) Submitted: 3/22/2007 8:16:13 AM : Outperform Start Price: $12.59 GUID Score: -102.21

Guidance Software is one of the leading software solutions providers for digital investigations. It enables the corporations and government agencies to search and analyze data across various platforms with help of its core product EnCase Enterprise. While EnCase Forensic software is used primarily by law enforcement and government agencies. The company has a large customer base that includes over ninety Fortune 500 companies, and more than 1,000 government and law enforcement agencies and other customers worldwide.
The ever increasing reliance of organization on the electronic medium, be it e-mails, intranet, or internet, has also exposed the key information to various risks and attempted manipulation. The new age data related risks have purported companies like Guidance Software to create solutions for digital investigation. Though a niche category, the demand for digital investigation and cyber forensic solutions has seen a growing trend, with market reaching to $600 million in 2005. While in future the market is expected to grow by more than two folds by 2009, as growing number of electronic crimes and domestic lawsuits in which large corporations are involved, is set to be the key driver for the digital investigations market.
Guidance Software’s performance have been a mixed one, as company’s strong license growth has led to overall revenues rising by over 40%, while the reduced margins and rise in depreciation charges has resulted in a net loss. The aggressive investment in sales and marketing to take advantage of the market opportunity can also be cited as one of the key reason for margin decline. Going forward in 2007, the company looks set to benefit from strong demand of forensic products from law enforcement agencies. Moreover, with the extended product line, positive industry outlook and dominant position, the company appears ordained to deliver a strong performance. Further, with most of the major investments already accounted for, 2007 could be the year to cash in, creating a positive impact on margins and the cash flows. All in all Guidance Software can prove a very healthy investment in 2007.

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