The recent spate of laptop thefts leading to the loss of personal and financial information of millions of users has turned the spotlight on a less visible segment of the security industry: laptop and data security companies.

On Wednesday, General Electric admitted that more than 50,000 former and current employees faced the risk of identity fraud after a laptop computer containing their personal information was stolen. The incident comes on the heels of news that the U.S. Department of Commerce has lost 1,100 laptops since 2001.

Laptop security has suddenly been thrust into the spotlight. Experts estimate that some 600,000 laptops are stolen every year in the United States. Consumer rights protection group Privacy Rights Clearinghouse says that 93 million data records of U.S. residents have been exposed due to security breaches since February 2005.

The majority of incidents in cases of data loss have resulted from the theft of laptops that have contained sensitive personal and financial information. “We are seeing a great number of laptop thefts,” said Beth Givens, director of the Privacy Right Clearinghouse. “That is certainly one of the larger categories among the incidents we track.”

Laptop theft was a hidden problem, said John Livingston, CEO of Absolute Software. But a change in data privacy laws has forced many of these incidents to the surface. In 2003, California became the first state to adopt SB 1386 or the Security Breach Information Act, a data privacy law that requires organizations handling third-party confidential information to notify each individual of any potential data loss. Since then, 23 states have adopted similar measures.

“There is tremendous pressure from the government on corporate America to comply with the data privacy laws,” said Mr. Livingston. “For the first time companies are being held accountable for information lost.”

Growth Market

For companies specializing in laptop security that has meant a spike in sales. Take market leader Absolute Software, which is listed on the Canadian stock exchange. Until two years ago, Absolute had a compounded year-on-year growth rate of 20 percent. That zoomed up to 80 percent in the last two years, said Mr. Livingston.

“We have seen a fundamental shift in organizational attitudes toward securing their computers, and that has lead to a shift in demand for our products and services,” he said.

Absolute came to market with Computrace, its computer theft recovery and data deletion product, in 1994. Last June the company had 79 employees and sales contracts worth $12.3 million. This year it has 113 employees and is set to close fiscal 2007 with sales contracts worth $27.6 million.

Absolute’s rapid growth comes from the unique position that its Computrace product occupies. Computrace can help detect lost laptops and remotely delete stolen data because the software is baked into the laptop, making it almost impossible to remove.

“We have relationships with all the major laptop manufacturers that gives us the ability to embed our technology into the firmware, which gives us access to the laptop even when it has gone outside a designated area,” said Mr. Livingston.

Absolute is not the only company doing this. Nashville, Tennessee-based CyberAngel Security Solutions, and Playa Del Rey, California-based Trackion are some of the other players. However, both have licensed the technology from Absolute.

“We have evangelized the space on our own for a long time, but now it is becoming a hot space,” said Mr. Livingston.

A Different Road

Absolute’s patents may make it difficult for other companies to have laptop recovery products. But companies are trying to approach the issue from the angle of data security. Protecting and recovering the laptop itself may not be as important as protecting the data and files on the machine.

That’s where companies like Essential Software, a three-year-old Bellevue, Washington-based startup comes in. The company’s product Taceo is being positioned as an anti-theft application for individuals and small businesses. Taceo offers email encryption and protects files on the laptop making it impossible for the files to be accessed in case the laptop is lost or stolen. The remote laptop security feature can be accessed through the Internet, says Essential Software.

Another company is Rocket Software, which has created the Rocket.SecurityVault to prevent unauthorized users from accessing files by creating a virtual hard drive visible only to registered users. For everyone else, the hidden files are inaccessible because there is no way to even know about their existence without a password, according to the company.

It won’t be long before more players jump in, said Mr. Livingston.

“Recent events have made this category a very valuable category, but it’s still very early in the industry,” he said. “There are definitely going to be additional entrants over time.”

Contact the writer:PGanapati@RedHerring.com

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