Vasco Data Security (NASDAQ: VDSI) still strong

VDSI fell from 37 to 34 on Thursday on news that their revenues might suffer from the problems in the banking industry.

http://www.forbes.com/markets/2007/09/20/vasco-data-closer-markets-equity-cx_cg_0920markets39.html

I think this is more noise than information. Agreed, 85 % of VDSI's revenues come from banks. However (and thats a big however), they provide user authentication products (security software and hardware). This security software is essential for large banks that do many extremely high value transactions (wires, electronic transfers etc) on a daily basis.

Hedge funds, investment firms and mortgage companies have suffered from betting on bad commercial paper. I don't see this doesn't directly translating into banks cutting their software systems, especially software that is essential for the credibility and safety of high volume transactions. If anything, some banks that were considering delaying the purchase of Vasco's security products will delay it a bit further. The subprime problem is not related to Vasco's products at all and since the problem mainly arose due to lack of regulation around CDO's and in-accurately rated Asset-backed commercial securities, investment banks that did lose money will cut costs but closing their subprime commercial paper departments and not their softwares. This is exactly what Lehman Brothers did.

In my opinion, the company is still gold and I have a strong feeling we will see positive results in the next quarterly report. Click here for my detailed fundamental analysis on VDSI.