Senetas Corporation Limited · ASX:SEN
Senetas — Investor Presentation (September 2005)
75 slides from Senetas's investor presentation, Sep 12, 2005
Slide 1: Company Announcements Office cover letter
SENETAS Corporation Limited MELBOURNE Level 1/11 Queens Road Melbourne VIC 3004 12 September 2005 Australia +61 3 9868 4555 +61 3 9821 4899 SYDNEY Company Announcements Office Suite 5, Level 13 327 Pitt Street ASX Sydney NSW 2000 Australia Level 6 +61 2 9283 2333 +61 2 9283 7558 20 Bridge Street cor
Slide 2: Senetas Corporation Ltd September 2005
SENETAS CORPORATION LTD SEPTEMBER 2005
Slide 3: Senetas Corporation Ltd (ASX:SEN)
Senetas Corporation Ltd (ASX:SEN) • Member ASX 300 Index • Australias leading listed IT Security Company Financial Outlook 2005/2006 E 2004/2005 Growth E Revenue 30 20 50% NPBT 11 7.4* 50% EPS 2.4 1.60 50% Share Price 32 P/E Ratio** 13 20 Dividend 1.65 Dividend Yield 5% * Note: The net profit for 20
Slide 4: Agenda
Agenda • Who We Are • Common Definitions • Strategic Objective • Market Opportunity • Competitive Advantage • Senetas – the Company – Markets – Products – Market Projections – Competitive advantage – Market Strategies – Financials • Summary
Slide 5: Who We Are
Who We Are • Leading global supplier of high speed encryption hardware technology to protect information in transmission where security must not be compromised • Targeting Government and large commercial enterprises • Enablers of organisations to run security applications on high speed networks, (10
Slide 6: History
History • • Entrenching Entrenchingfirst firstmover mover market advantage market advantage • • Robust Robustclient clientbase, base,with with • • Underlying Underlying core US DoD as client core US DoD as client security securitytheme theme • • Established • • Global Globallaunch launchof ofSONET •
Slide 7: What is encryption?
What is encryption? • Definition – To alter information using a secret code so as to be unintelligible to unauthorised parties – Most effective way to achieve information security – Encryption generally is an extremely old application. Since the earliest forms of communication “encryption” has alway
Slide 8: What is encryption?
What is encryption? • Encryption protects critical infrastructure and information: – Military/Defence – Financial/commercial context – Health sector – Government • Core application of Senetas’ technology • Senetas’ IP has the ability to encrypt data at very high speeds with low impact
Slide 9: Network Standards – Common Definitions
Network Standards – Common Definitions • ATM (Asynchronous Transfer Mode) – A network technology based on transferring data in cells or packets of a fixed size. – The small, constant cell size allows ATM equipment to efficiently transmit video, audio, and computer data over the same network • SONET
Slide 10: Network Standards – Common Definitions
Network Standards – Common Definitions • Ethernet – A local-area network (LAN) architecture – Ethernet initially supported data transfer rates of 10Mbps – Widely implemented LAN standard – A newer version of Ethernet called fast Ethernet, supports data transfer rates of 100Mbps – The newest version,
Slide 11: Network Standards – Common Definitions
Network Standards – Common Definitions • Network – Is a group of two or more computer systems linked together • Protocol – Defines a common set of rules and signals that computers on the network use to communicate eg. Ethernet is a protocol • Architecture – Is a design. The term architecture can ref
Slide 12: Network Standards – Common Definitions
Network Standards – Common Definitions • Optical Carrier (OC) – (OC) Levels – SONET includes a set of signal rate multiples for transmitting digital signals on optical fibre. – ATM makes use of some of the OC levels. Optical Carrier Level Data Rate OC- 1 51.84 Mbps OC- 3 155.52 Mbps OC- 12 622.08 Mb
Slide 13: Network Standards – Common Definitions
Network Standards – Common Definitions Encryption Algorithm Encryption Algorithm Provided (AES, DES etc) Provided (AES, DES etc) Tightly Integrated into Senetas Hardware Senetas High Speed Senetas High Speed Hardware Encryption Hardware Encryption Communication Devices Communication Devices CypherCe
Slide 14: Strategic Objective: Corporate
Strategic Objective: Corporate • To extend Senetas’ lead as the dominant global supplier of high speed encryption products • To leverage opportunities for high speed communication hardware technology in particular security niche markets • To supplement existing products sets
Slide 15: Strategic Objective: Operational
Strategic Objective: Operational • Go To Market – Partners and coverage • Product RoadMap – Market driven plan • Structural – Proven integration capability
Slide 16: Market Opportunity
Market Opportunity • Global market for layer 2 IT security encryption devices for high speed networks forecast to grow from US$250 million to US$1 billion by 2008* • Industry Background – Recent re-emergence of Layer 2 encryptors to overcome limitations at the IP Layer 3 network protocol • Rapid gro
Slide 17: Product Sales: Positioned for Growth
Positioned for Growth Product Sales Introduction Growth Maturity
Slide 18: Markets: Network Encryption
Markets: Network Encryption Regulated RegulatedPrivate Private Government Government Industries Industries •Federal •Federal •Banking •Bankingand and •State •State Finance Finance •Revenue •Revenue •Insurance •Insurance Authorities Authorities ••Health •Social Health •SocialSecurity Security ••Utili
Slide 19: Market Drivers (Summary)
Market Drivers (Summary) • Availability today of networks and network infrastructure – Reduction in bandwidth costs – More applications – More secure data • Security regulations – Sarbanes-Oxley, Graham-Leach-Bliley, Global Privacy Legislation, BASIL II, HIPAA • More Secure posture of Governments, g
Slide 20: Market Drivers
Market Drivers • High-speed links the most important, critical to business / Government operations: – Business continuity, disaster recovery business consolidation/outsourcing • Data loss outcomes include: – Reduced productivity – Lost income – Inability to meet forecasts • These communication links
Slide 21: Market Drivers
Market Drivers • Exploding demand for fibre (SONET/SDH) networks • Large enterprises use fibre for these critical applications: – Consolidating processing into a few large locations – Archiving data offsite – Backing up data at a disaster recovery site – Unifying on standards for communications and
Slide 22: Market Positioning
Market Positioning LAN PBX Switched Network MAN MAN Wide Area Fibre Network WAN IP Router Networks
Slide 23: Market Positioning
Market Positioning Fibre Optic Vulnerabilities • Unauthorised access Voice Data • Tampering Video • Failures • MIS-configurations ADM Repeater ADM ADM ADM Repeater
Slide 24: Market - The Threat: Fibre Tapping
Market - The Threat: Fibre Tapping “Security “Securityforces forcesininthe theU.S. U.S. “Tapping “Tappingfibre fibreoptic opticcable cable discovered an illegally without being without being discovered an illegally detected…certainly installed installedfibre fibre detected…certainlyisn’t isn’t eaves
Slide 25: Senetas' Security Products
Senetas’ Security Products • Designed to support multi-protocol infrastructures (ATM, SONET/SDH) • Designed to encrypt at very high speeds on a users’ network (from 1Gbps to 10Gbps) • Designed to International Security Standards eg. ATM and SONET protocols • “Critical to Senetas’ Security Success”
Slide 26: Senetas' Security Products
Senetas’ Security Products Network Regulated Regulated Government Government Security Private Private Military Military Industries Industries Civilian Products Civilian Sonet/SDH High Speed ATM Security Ethernet ATM Low Speed Ethernet Security Frame Link
Slide 27: Senetas' Security Products
Senetas’ Security Products SONET • Low “overhead” • Leased, private, public WAN, MAN (Fiber Optics) ATM ETHERNET Type 1 • I Gb Products Frame • 2005 intro Link LAN, MAN ETHERNET (wired) 10/100 Mb 2005 intro 1 Mbps 100 Mbps 1 Gbps 2 Gbps 10 Gbps
Slide 28: Senetas' Security Product Range
Senetas’ Security Product CypherNet CypherNet Fibre Fibre Channel Channel Range CypherNet CypherNet Ethernet Ethernet 11 Gbps Gbps CypherNet CypherNet Ethernet Ethernet 11 Gbps Gbps CypherNet CypherNet CypherNet CypherNet CypherNet CypherNet Ethernet Ethernet Ethernet Ethernet Ethernet Ethernet 10 1
Slide 29: Senetas Market Projections
Senetas Market Projections • ATM current sales US $8m to US $10m p.a. • SONET current worldwide market US$250m* • SONET market projections estimated to rise to US $500m p.a. by 2008* • Ethernet market projections: Although still in infancy early market indications show market similar to SONET* • Fib
Slide 30: SONET Market Projections
SONET Market Projections Worldwide WorldwideSONET SONETEncrytion EncrytionTAM TAM 300 300 250 250 200 200 U.S. US $m U.S. US $m 150 EMEA 150 EMEA APAC APAC 100 100 50 50 0 0 2005 2006 2007 2008 2005 2006 2007 2008 Source: 2004 IDC “Worldwide SONET Hardware Market” Note: Data reflects potential SONET
Slide 31: Competitive Position (Summary)
Competitive Position (Summary) • Leading market share position in a rapidly emerging market – “First mover” advantage – 18-24 months ahead of nearest competitor – Continued significant investment in R&D • Customer validation • Accreditation to the highest international levels: CC, FIPS • Senetas str
Slide 32: Competitive Position
Competitive Position • Strong earnings growth – Achieved $7.4 million in EBIT for fiscal year ended June 2005 – In excess of $11 million in EBIT forecast for fiscal 2006 • Technology partnership with SafeNet, leading global IT security solutions provider • Ownership of intellectual property, several
Slide 33: Competitive Position
Competitive Position • Market has expanded very rapidly in last two years with very few competitors emerging to date • Encountered IPSec, which has following issues*: – Limitations – Speed – Latency – Management • IPSec is complimentary to our Senetas offerings • Cylink (ATM) bought by SafeNet, tech
Slide 34: Customers
Customers • Existing Global Customers – Approved incumbent global supplier to financial and government institutions including: • United States Government and Defence Agencies • EMEA Defence Agencies • Middle Eastern Law enforcement Agency • Fifth Third Bank • Emerging Security Customers – Enhancemen
Slide 35: Customers
Customers • Existing Local Customers – Approved incumbent supplier to financial and government institutions including: • Australian Law Enforcement Agencies • Two of Australia’s largest banks • Australian Revenue Authority • Telstra • Emerging Local Security Customers – Increasing demand from State
Slide 36: The Business Case
The Business Case LAN PBX Switched Network MAN MAN Wide Area Fibre Network WAN IP Router Networks
Slide 37: The Business Case
The Business Case SONET versus IPSec High-Speed Security •• 10 10Gbps Gbpsthroughput throughputrequired required •• Low Lowlatency, latency,high highquality qualityofofservice service SONET •• Cost Costsavings savingson onbandwidth: bandwidth:up uptotoUS$200k/year US$200k/year •• Ease Easeofof“conne
Slide 38: Global Case Study
Global Case Study Senetas’s High-Speed Products Successes Sustainable Advantages – US DoD • Highest speed on the • Selected for Global Grid market. Best performance SONET – Finance Institutions • Experience, market 1G – • Backbone to core data centers leader 10 Gbps – Systems Integrators • Known com
Slide 39: Global Case Study
Global Case Study Senetas’s High-Speed Products Successes Sustainable Advantages •Easier, quicker and less intrusive than IPSec VPNs •More bandwidth efficient than IPSec VPNs, resulting in increased performance between SONET core sites Fifth Third Bank OC 12 •Less complicated and easier to support t
Slide 40: Local Case Study
Local Case Study Senetas’s High-Speed Products Successes Sustainable Advantages • Enterprise Encryption ATM Solution SONET/S • A major Australian Federal •Speed DH Government Organisation • Ease of management Ethernet • Experience and Technical Capability • Speed ATM • Mission Critical • A major Fin
Slide 41: Generic Case Study: The Need for Speed
Generic Case Study: - The Need for Speed • Very Sensitive Data – Transmitted from production to Recovery Site • Very Large Volumes of Data – A variety of data replication applications – Geographically dispersed sites
Slide 42: ATM Implementation
ATM Implementation Production Site Recovery Site ATM Switches ATM Switches SAN SAN Mainframe Senetas Mainframe Senetas CypherNet CypherNet Servers Servers ATM ATM
Slide 43: SONET Implementation
SONET Implementation Production Site Recovery Site Routers / Controllers Routers / Controllers CISCO Routers CISCO Routers Processing / Senetas Processing / Senetas Storage Cypher Storage Cypher SONET SONET
Slide 44: Senetas High Speed Encryption Solution for a Typical Customer
Senetas High Speed Encryption Solution - for a Typical customer Branch Offices Vendors Customers Partners SONET/ SDH Networks Intranet Layer 1 (Physical Layer) Line and Path Encryption Main Office Internet Branch Offices Departments CypherNet SONET/SDH Head Office HQ Layer 3 (Network Layer) IP based
Slide 45: Market Strategies: Corporate
Market Strategies: Corporate • Organic Growth − Local encryption business − 30%CAGR − Grow from around $5m p.a. to $10m p.a. over 2 to 3 years – Local SafeNet business − New Line of business − Grow from just sub $1m p.a. to $5m p.a. over 2 to 3 years
Slide 46: Market Strategies: Corporate
Market Strategies: Corporate • Growth through acquisition – only if opportunity presents – Rapid growth of existing market – Identifying niche opportunities in related markets − Minimum or zero competition − High growth market − High margin − Preferably compatible with current platform − Quick acces
Slide 47: Market Strategies: Operational
Market Strategies: Operational • Sales strategy: Go to Market – Global – Local • Product Roadmap • Structure
Slide 48: Market Strategies: Operational
Market Strategies: Operational • Sales strategy: Go to Market: Global – SafeNet Global Technology Partner − Strong and growing partnership − SafeNet provides global reach – Enhance Technology Partnership with SafeNet − Extend product range − Identify additional global partners to enhance SafeNet/Sen
Slide 49: Market Strategies: Operational
Market Strategies: Operational • Sales strategy: Go to Market: Global – SafeNet Partnership − Rapid emerging market has lead to new agreement with SafeNet • extending product range – Retaining above industry standards for overall royalties/licence fees – Initially royalties/licence fees remain unalt
Slide 50: Market Strategies: Operational
Market Strategies: Operational • Sales strategy: Go to Market: Local – Direct Senetas encryption sales – Build SafeNet presence in the region − Official launch Q1 FY06 – Partner with leading Telcos and SI’s in the region
Slide 51: Market Strategies: Operational – Product Roadmap
Market Strategies: Operational • Product Roadmap – Strategy − Extend Senetas’ lead as the dominant developer of High Speed Encryption and related products − Market driven R&D program – Plans − Increase R&D expenditure (up to 50% increase in FY06) − Developers − Development and test environment − Str
Slide 52: Organisational Structure
Organisational Structure Francis Galbally CEO Joe Vohwinkel Ron Lunt Peter Sim Engineering Management Operations/Sales Product Management
Slide 53: Management
Management • Previously practiced law, specialising in • 15 years IT security and corporate, commercial enterprise management and taxation experience with Senetas • More than 10 years • Previous roles at IBM and extensive experience in Digital the finance, property and • Co-founded IBK in 1996, IT i
Slide 54: Management
Management • Co-founder of CTAM, along with a number of • Assisted in the other Senetas’ senior development of engineers competitive products to • More than 20 years of CTAM security, encryption and • Seconded from SafeNet management experience to introduce compatible • Degrees in Electrical develop
Slide 55: Financial Position
Financial Position • Substantial earnings growth since 2002 which is projected to continue over next few years: – $7m EBIT FY 2005 – $11m EBIT FY 2006 • Cash at bank: A$17m • No debt • Share price: A$0.33 (as at 08.09.05) • Market capitalisation: A$153m • Shares on issue: 465m • EPS 2005 2.4 cents •
Slide 56: Financial Performance
Financial Performance (1)(2) Senetas SenetasRevenue Revenueand andEBIT EBITHistory History (1)(2) 35 35 30 30 25 25 20 AUD$m 20 AUD$m 15 15 10 10 5 5 Revenue Revenue EBIT EBIT 0 0 2004 2005E 2006E 2004 2005E 2006E (1) Fiscal year ends June 30 (2) SEN reports in $A. Current exchange rate of 0.76 has
Slide 57: Summary
Summary • A leading global supplier of high speed encryption technology utilising own IP (Patents Pending) • Established track record • First mover advantage in SONET technology • Strongly positioned, world leading technology • Defined and growing niche market, established customer portfolio • Gover
Slide 58: Questions
Questions
Slide 59: The OSI Model
The OSI Model ATM IPSec Sonet Ethernet
Slide 60: Why is the OSI Model important?
Why is the OSI Model important? • Actually, it is not! – However, it is useful as a reference for where encryption is being done. – Encryption today can occur at • Layer 2 e.g. Frame, ATM, Sonet, Link, Ethernet • Layer 3 e.g. IPSec • Application Layer (e.g., SSL VPN or in the application itself)
Slide 61: ATM
ATM • Connection-oriented protocol with fixed length cells – leading to fast switching and predictable levels of service • Support for voice, video, data with five broad service categories (QoS) – Constant, Variable, Unspecified, Available • Started out as a backbone technology but later evolved to
Slide 62: SONET
SONET • Mature technology with “carrier-class” reliability – Sophisticated management functions using overhead bytes – “Self-healing” ring architecture • Key Infrastructure elements – Terminal Multiplexers (TM) – Add-Drop Multiplexers (ADM) – Digital Cross-connect (DCS)
Slide 63: Speeds
Figure 1-1 * SONET Optical Line Rates Optical Carrier Level Electrical Equivalent Line Rate Mbps 0c-1 STS-1 51.84 0C-3 STS-3 155.52 0C-12 STS-12 622.08 0C-24 STS-24 1244.16 0C-48 STS-48 2488.32 0C-192 STS-192 9953.28 NOTE: The higher line rates are integer multiples of the base rate of 51.84 Mbps. F
Slide 64: Senetas Products – CypherNET Suite
Senetas Products – CypherNET Suite • CypherNET users value a single solution that provides scalable performance and seamless end-to-end integration to deliver improved network operation and performance without compromising security. – Integrated Common Management Solution – Secure Remote Management
Slide 65: Senetas Products – CypherNET Platform
Senetas Products – CypherNET Platform Key Management Indicators •ATM Forum Security Specification V1.1 •Two Line 20 character LCD display •RSA public key •LED’s indicating status of local interface, •Master/Session keys network interface, temperature, battery status, •Automatic periodic session key
Slide 66: Senetas Products – CypherNET ATM
Senetas Products – CypherNET ATM • CypherNET ATM is a high performance, purpose built integrated security solution designed to secure voice, data and video information transmitted over Asynchronous Transfer Mode (ATM) networks. CypherNET has been designed to integrate transparently and simply into A
Slide 67: Senetas Products – CypherNET ATM
Senetas Products – CypherNET ATM Cryptography Interfaces •AES •OC12-c/STM-4 Single/Multimode fibre 2, 15, •DES/3DES 40km reach. SC connectors •CFB providing automatic crypto •OC3-c/STM-1 Single/Multimode fibre 2, 15, resynchronisation 40km reach. SC connectors with error extension of one cell •E1/E3
Slide 68: Senetas Products – CypherNET SONET OC48
Senetas Products – CypherNET SONET OC48 • CypherNET SONET OC48 is a high performance, purpose built integrated security solution designed to secure SONET networks at speeds up to 2.4Gbps. CypherNET SONET OC48 has been designed to integrate transparently and simply into the SONET network architecture
Slide 69: Senetas Products – CypherNET SONET OC48
Senetas Products – CypherNET SONET OC48 Cryptography Interfaces •AES algorithm - 256 bit key •OC48-c/STM-16 Single/Multimode fibre 2, •Counter mode 15km reach. LC connectors •Automatic crypto-resynchronisation in less •OC12-c/STM-4 Single/Multimode fibre 2, 15, than 10ms 40km reach. LC connectors Ci
Slide 70: Senetas Products – CypherNET SONET OC192
Senetas Products – CypherNET SONET OC192 • CypherNET SONET OC192 is a high performance, purpose built integrated security solution designed to secure SONET networks at speeds of 10Gbps. CypherNET SONET OC192 has been designed to integrate transparently and simply into the SONET/SDH network architect
Slide 71: Senetas Products – CypherNET SONET OC192
Senetas Products – CypherNET SONET OC192 Cryptography Interfaces •AES algorithm - 256 bit key •OC192-c/STM-64 Single mode fibre 15km •Counter mode and 40km reach. LC connectors •Automatic crypto-resynchronisation in less •3R interfaces (re-amplify, re-shape, re-time) than 10ms Network Protocols Circ
Slide 72: Senetas Products – CypherNET Ethernet
Senetas Products – CypherNET Ethernet • CypherNET Ethernet is a high performance, purpose built integrated security solution that provides independent encryption for each connection in an Ethernet network. CypherNET Ethernet has been designed to integrate transparently and simply into Ethernet netwo
Slide 73: Senetas Products – CypherNET Ethernet
Senetas Products – CypherNET Ethernet Cryptography Interfaces •AES •10/100Base-T RJ45 •CBC •1000Base-T RJ45 •Self synchronising 8-bit cipher feedback •1000Base-SX Connections •1000Base-LH •Supports up to 512 encrypted or unencrypted Network Protocols connections •802.3 •Each encrypted connection use
Slide 74: What is Fibre Channel (FC)?
What is Fibre Channel (FC)? • A serial data transfer architecture developed by a consortium of computer and mass storage device manufacturers and now being standardized by ANSI. The FC interface was specifically designed to speed communications in multiple drive systems. • FC was designed for new ma
Slide 75: What are the key features of Fibre Channel?
What are the key features of Fibre Channel? • Fibre Channel key features include: – Hot-pluggability – Fibre Channel drives can be installed or removed while the host system is operational, which is crucial in high-end and heavy-use server systems where there is little or no downtime. – ANSI standar