Guidance Software, in growth sector, preparing its IPO.

PASADENA-based Guidance Software Inc., which makes software used for digital forensics and investigations, is going public.

The company would like to raise as much as $80 million through its initial public offering, which will be listed on the Nasdaq under the symbol GUID.

Morgan Stanley. Lehman Bros., Wachovia Securities and A.G. Edwards are underwriting the IPO. The firm offered no indication on the number of shares to be offered.

Guidance's flagship product is EnCase Enterprise, which helps search, collect and analyze digital evidence, such as from servers, desktops and laptops. E-investigations have in the past been conducted by highly paid consultants, but EnCase is much more streamlined and cost-effective. The software is also able to uncover deleted and concealed data.

The company has been involved in a number of high-profile investigations, here and abroad. When Al Qaida leader Abu Musab al-Zarqawi was killed in Iraq, EnCase software was used to search the hard drive of the computers in the house where he had been staying. EnCase was also used to collect evidence in the murder trial of Scott Peterson.

This is definitely a growth industry. Increasing scrutiny on corporate accounting and corporate integrity--witness Hewlett Packard--should create more opportunities. In addition, there is a pending amendment to the Federal Rules of Civil Procedure, which will require litigants to discuss the production of electronic evidence. There will also be an obligation to preserve and identify electronic evidence.

Guidance, which lists former CIA director George Tenet and former In-Q-Tel President Amit Yoran on its board, reported 2005 net income of $1.6 million compared with a net loss of $792,000 in 2004. Revenues in 2005 were $39.5 million. It has posted revenues of $24.5 million for the first part of 2006, a 46 percent increase over the same period a year ago.