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By Michael Kanellos, 15 April 2003 09:07

NEWS The universal problems of spam email and viruses mean companies that specialise in software, hardware and services for the security industry could see stronger growth this year than counterparts in other technology fields, according to speakers at this week's RSA Conference 2003 in San Francisco. Some predictions put growth in the security sector at between five and 20 per cent for 2003 and 2004. Much of the increase will be spent by September, the month when annual US government technology budgets get used up. Government expenditure on IT security has increased dramatically in the US during the past couple of years of political unrest, with the threat of cyber terrorism and a need for increased security at the forefront of government thinking. Consultants and IT professionals could reap a substantial portion of the budget increase as nearly 80 per cent of the new funds revolve around hiring people to implement these systems. Wendell Laidley, a former security analyst turned investor, said: "The September quarter is the potential inflection point for the security vendors. The magnitude of the spending has the potential to represent a positive catalyst." However, Jeff Glidden, RSA Security's CFO, warned against expecting too much from the increase in government spending. Government spending is now five per cent of RSA's total revenue and could reach 10 per cent. The market, though, remains difficult to predict. RSA specialises in encryption software and services. "If we get an uptick, it will probably offset any imbalances from downturns in Europe and elsewhere," he said. "It is a little bit of an uptick, but it is not a reason to buy the stock." Regulations and legal restrictions imposed on private businesses could also boost sales. Amazon.com, Microsoft and others in recent years have been hit with lawsuits and enforcement actions because of security breaches, which have resulted in fines and huge legal bills, said John Tomaszewski, chief privacy officer at CheckFree, which specialises in payment systems. In one celebrated case, Amazon spent $1.9m to settle a privacy suit with customers, another $1.9m in legal fees, and had to build a security system as a result of failed privacy policies. Citibank, meanwhile, paid $1.4m in fines and an unknown amount of legal fees in an action before the Federal Trade Commission for selling customer data.