Wave Systems Corp. (fka WAVXQ)

[vickers2]

Dutton research notes update

http://www.jmdutton.com/research/WAVX/index.html

Rating: Strong Speculative Buy
03/13/2007
WAVE TDM Shipping With Seagate Notebook PC Hard Drive
Wave announced today that its Embassy Security Center's Trusted Drive Manager (TDM) is featured in Seagate's (NYSE: STX)
Momentus 5400 FDE.2 notebook PC hard drive that is shipping to ASI Computer Technologies. This represents the first meaningful
shipment of Seagate's Momentus 5400 FDE drives incorporating Wave's Embassy Trust Drive Manager and may be the first step
toward broader Seagate/Wave notebook PC hard drive and TDM deployment.
Wave's TDM software provides setup and configuration of the Seagate drives as well as an easy to use password creation and back-up system that can be used in conjunction with the Wave EMBASSY Key Management Server. In addition, along with the Seagate DriveTrust Technology, Wave's TDM enables pre-boot user authenticatication and full disc encryption thus preventing unauthorized access in the event of loss or theft of the system or hard drive.
Following further due diligence, we have derived key takeaways. In our view, the combined offering that will ship to ASI seeks to
address well-publicized customer fears regarding laptop data security, as laptop loss and theft is a significant contributor to computer data breaches.
We note that while the client software revenue generation from this shipment is not expected to be significant, we believe that it may be a harbinger of broader deployments in conjunction with Seagate. For example, ASI is utilizing the Wave TDM-integrated Seagate notebook drive for its new, whitebook (non-brand) system which will also incorporate the use of a biometric device for dual authentication and access control, thus enabling ASI to offer a unique, secure notebook.
Seagate is a strong supporter of whitebook system providers, whose sales are expected to rise by 20% in 2007 to 3.75 million
shipments, according to Gartner Group. Without a clear brand differentiator, system builders such as ASI must provide a differentiated product such as the Seagate/Wave offering. If this offering proves popular, it is possible that ASI and Seagate go beyond getting their feet wet in the trusted computing space and deploy this product further. In addition, other system builders with whom Seagate partners may seek to offer a similar whitebook feature-set.
We expect to receive more clarity regarding revenue from contribution from this deal as well as broader deployment and whitebook market share opportunities in the coming months.
Separately, Wave is releasing its 4Q06 and FY07 financials after the close on Teusday, March 14, 2007, with a conference call to follow at 4:30 P.M. EST. While we maintain current Dutton estimates at this time, we expect to update our forecasts in a post-release research report.