Aladdin Knowledge Systems Ltd. Q3 2008 Earnings Call Transcript

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2008-10-16 11:38:09.0

Tags: Deutsche Bank AG, SafeWord, Call Transcript, Earnings, Mergers & Acquisitions, Corporate Law, Sales Strategy, Investment, Finance, Business Operations, Sales, Seeking Alpha, Deutsche Bank AG, SafeWord, Call Transcript, Earnings, Mergers & Acquisitions, Corporate Law, Sales Strategy, Investment, Finance, Business Operations, Sales, Seeking Alpha, Aladdin Knowledge Systems

Question-and-Answer Session

Operator

(Operator Instructions) The first question is from Brian Thackray, Deutsche Bank. Please go ahead.

Brian Thackray - Deutsche Bank

Hello, good quarter.

Yanki Margalit

Thank you.

Aviram Shemer

Thank you.

Brian Thackray - Deutsche Bank

First question, Yanki, can you quantify how much contribution from SafeWord, Eutronsec and Athena was in the enterprise results?

Yanki Margalit

Sure, we will do that, but I would like to put a disclaimer here. We are going to do it for the quarter as in Q3 we had only a few weeks of that acquisition business. We are not, on a quarterly basis, going to be able to cut our sales by each and every product, however Aviram, please go ahead and provide the contribution from SafeWord and Eutronsec in the few weeks of Q3.

Aviram Shemer

Brian, SafeWord non-GAAP revenue contribution was approximately $3.3 million, and the Eutronsec contribution was approximately $300,000.

Brian Thackray - Deutsche Bank

Okay thanks you. On the gross margin front, can you just give a little bit more detail in terms of what is driving that change there? Is that something that is going to be continued going forward as we look into next year? Do you see further pressure on that coming down next year?

Aviram Shemer

It will enable us to even increase our margins next year. It is true that we are winning larger deals at lower prices, but overall we do not feel any significant price pressure in the market. We expect to be able to enhance the SafeWord margins in a significant way next year. That will start of our plan. We assume that we can reduce production for the SafeWord keys by dozens of points for next year. So overall, we are reducing our own internal production costs for our own products, for the new acquired product.

It is true that we are closing some larger deals at lower prices from time to time, but we see there is a trend and we do not anticipate cost of goods to increase next year. Contrary to that, I would suggest that Q4 was slightly on the low part of things, and we may be able to expect higher margins going forward.

Brian Thackray - Deutsche Bank

I got it. Thanks a lot. Good quarter.

Aviram Shemer

Thank you.

Operator

Thank you. The next question is from Joel Fishbein of Lazard capital. Please go ahead.

 

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