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SurfControl dips into the red ahead of WebSense takeover

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SurfControl announced improved sales but a dip into the red on Wednesday, in what's expected to be the censorware firm's last quarterly earnings report before the completion of its acquisition by Websense.

For its fourth quarter, which ended 30 June, SurfControl brought in revenues of $33.9m, up 23 per cent on sales of $27.6m for the same quarter last year. Pre-tax loss for Q4 2007 came in at $6.2m, compared to profits of $0.5m for Q4 2006.

SurfControl recorded a loss due to one off charges of $4.2m and a decline in gross margins. On the plus-side, on-demand service and product billings almost doubled during the quarter, rising 97 per cent, as revenues from straightforward software licensing slipped four per cent. SurfControl bought into the market for delivering services via the internet with its July 2006 acquisition of email and virus filtering firm BlackSpider.

The firm also launched a web filter appliance during the quarter, further underlining its determination to switch away from traditional software licensing. OEM and appliance billings for the quarter grew 94 per cent and 170 per cent respectively.

SurfControl is also increasingly working through the channel - 79 per cent of all billing is now done via a channel partner, up from 65 per cent in the fourth quarter of 2006. The firm, which started life in Macclesfield, near Manchester - like lanky Liverpool front man Peter Crouch - achieved its long cherished ambition of booking half of its revenue in North America.

The company is in the process of changing its reporting period so its financial year ends on 31 December. For the year ending June 2007, SurfControl made a pre-tax loss of $9.4m compared with a profit of $0.7m in the preceding year.

SurfControl's results came in in-line with market expectations and its shares remained steady at around 686p. Next week SurfControl shareholders will vote on a friendly takeover of the firm by net security giant Websense.

Earlier this year, SurfControl's board recommended a 700p per share offer for the company from WebSense. Pending the agreement of shareholders, and regulatory approval, the deal is expected to complete in early October. ®

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