Security industry stocks in 1999 mirrored Wall Street’s overall performance for the year with astounding highs mixed with some depressing lows.

Driven by the high-tech frenzy, the stocks of computer security companies soared. An index of 32 separate computer security stocks registered an astronomical average rise of 214 percent. On the other hand, many stocks in the alarm and private corrections sectors acted as if they were in the depths of the Great Depression.

The NASDAQ Composite soared by a record-breaking 85.6 percent gain for the year, while the Dow Jones rose 25.2 percent with a late December surge.

Three Tech Stocks Lead Top Performers

The top three security stock performers in 1999 were small computer companies that captured the imagination of fixated investors.

Leading the list was Waltham, Mass.-based Netegrity (NASDAQ/NETE), a provider of software and services for controlling E-commerce access, which registered a 1,221-percent gain.

Not far behind Netegrity was higher-profiled Verisign (NASDAQ/VSRN). The company has attracted a substantial Wall Street following. Its stock gained 1,192 percent in 1999.

Rounding out the top three security companies was Diversinet (NASDAQ/DVNT), a Canadian provider of information security products. Its stock exploded, finishing up 968 percent for the year.

Loronix Information Systems (NASDAQ/LORX) designs and markets a variety of products. Loronix stock skyrocketed 730-percent, placing fourth overall.

A biometrics company, Viisage Technology (NASDAQ/VISG) finished fifth, posting a solid 545-percent stock gain boosted by a late December surge. The Littleton, Mass.-based firm paced a strong biometrics sector.

Lightbridge (NASDAQ/LTBG), which develops products and services to enable telecommunications carriers to prevent fraud and improve customer retention, recorded a 405-percent hike in its stock in 1999, good for sixth place overall. Lightbridge was one of the few top performers that actually made money during the year.

Tokyo-based Trend Micro (NASDAQ/TMIC), went public in July 1999 and saw its stock rise 389 percent. Trend Micro, which ranked seventh on the list, develops, markets and supports antivirus software and management solutions.

Another technology company that scored big in 1999 was NumereX (NASDAQ/NMRX), a communications company that provides wireline communications for the alarm industry. The stock of the Atlanta-based firm rose by 340 percent for the year.

Ninth-ranked Checkpoint Software (NASDAQ/CHKP), an Internet security company which operates out of Israel, was up 336 percent for the year. AXCESS Inc. (NASDAQ/AXSI), an emerging asset tracking firm, completed the top 10 with a stock appreciation rate of 282 percent for the year.

Longtime Stock Giants Struggle in 1999

Many of the large, brand name security firms were dismissed as dinosaurs on the market in 1999.

Such billion-dollar security giants as Burns Intl. (formerly Borg-Warner Security) (NYSE/BOR) and the Pittston Brink’s Group (NYSE/PZB) registered drops of 42 percent and 31 percent.

Tyco Intl. (NYSE/TYCO) also got hammered late in the year, losing 26 percent from its 1999 high, after the opening of an “informal inquiry” by the Securities and Exchange Commission (SEC).

The private corrections sector was particularly hard hit by events during the year. Problems at Prison Realty Corp. (NYSE/PZN) brought down the whole sector, losing 75 percent of its stock value during the year.

In a similar fashion, the problems at one high profiled company in the alarm sector, namely Protection One (NYSE/POI), helped put a damper on the whole sector.

Western Resources (NYSE/WR), which owns 85 percent of the Pro One’s stock took a hit with its own stock falling 49 percent for the year.

If you thought it was a mixed year for security stocks in 1999, fasten your seatbelts for an explosive 2000.

Mallon is founder and principal of Mallon & Associates in New York, an investment and banking firm serving the global security industry.

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