Ubizen Says It is a Takeover Target.

The trading in shares of Ubizen NV was briefly halted on Friday as the managed security services provider revealed that it is the subject of due diligence review and may be acquired.

In a vague statement to the markets, the Leuven, Belgium-based company said it is "evaluating an opportunity to support its future growth potential" and "the company has entered into a due diligence process."

VP of investor relations, Ina Suffeleers, confirmed that Ubizen is the subject of that due diligence and said that a single third party had instigated the process after discussions between the two companies. Suffeleers would not be drawn on the identity of the inquisitive party, and said that the process had only just begun.

The company was quick to quell over-excitement, and released a second statement to the markets stressing that: "The ongoing discussions are only in a very preliminary phase and there are no certainties or guarantees that these ongoing discussions will lead to anything concrete."

Ubizen is Europe's largest specialist security services provider and has been enjoying good revenue growth in recent quarters, although profitability remains hard to reach. For its most recent full year, ended September 30, 2002, the company recorded revenue growth of 22.5% to 121.3m euros ($142.8m), with a net loss of 27.5m euros ($32.4m).

Year-on-year comparison of more recent performance is difficult because the company divested its interest in its French subsidiary RISC Technology during the second quarter, reducing software revenue in the second quarter of 2003 to 335,000 euros ($394,094), compared to 5.1m euros ($5.9m) in the second quarter of 2002, and revenue from third-party products from 12m euros ($14.2m) to 2.3m euros ($2.8m). For the second quarter the company reported a net loss of 8.3m euros ($9.7m) on revenue of 13.4m euros ($15.7m).

At this early stage it is unclear which companies would want to make a move for Ubizen, although a security software specialist adding services skills is more likely than a services provider adding security skills. Another option would be an ISP or telecommunications firm wanting to add security value added services to its portfolio. Current telecom resellers of Ubizen's managed security services portfolio include Belgacom SA and BT Group Plc.

Ubizen's largest competitor RipTech Inc was snapped up for $145m in cash by security software giant Symantec Corp in July 2002. It is possible Symantec could look to add Ubizen's European focus to its RipTech assets. Ubizen has a rich technology partner list that covers the range of security software and hardware providers - including Nokia Corp, Internet Security Systems Inc, Entrust Inc and Trend Micro Inc - almost any of which could make use of the company's security services skills.

Worldwide information security services spending will grow at a compound annual growth rate of 20.9% to $23.5bn in 2007, according to recent figures from IDC. This far outstrips the forecast growth of 6.7% of the IT services market as a whole, which is expected to reach $490bn in 2007.