Fending Cyber Threats with a Fortress

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RuggedCom Fortifies the Smart Grid and Captures the Substation Market

By Joyce Pellino Crane

    I wonder how many utility executives lie awake at night worrying  about cyberthreats to their electricity substations.

    If you’ve ever gone a few days without electricity in your home,  you’ll quickly realize how minimal life becomes.  Working on your computerthe speedway to higher thinking and creativity is impossible.

    Watching television, charging your cell phone, keeping food frozen, and  micro-waving popcorn, can no longer be done. Every task requires  planning and, much more physical laborconsider what it would take  to wash and dry your laundry. Without electricity, all business and  governmental systems would stop cold. Imagine a world without  money transactions. Payrolls couldn’t be met, loans would languish, and interest accruals couldn’t be calculated. This is the stuff of a great  Hollywood thriller.RUGGEDCOM

     But for RuggedCom, Inc., (RUGGF: Pink) a manufacturer of  ruggedized communications equipment for utility substations,  it is a serious reality. The company’s products are designed for  the smart grid, with interconnectivity options and security features  necessary for regulatory compliance. Utility customers are able to  prevent accidental or malicious service disruptions by establishing  an electronic security perimeter with its routers and switches around  critical infrastructure.

     RuggedCom designs its routers, switches, serial servers, and  media converters to withstand extreme weather conditions such as  heat waves and the negative effects of natural phenomenon like lighting  strikes. The products are also immune to radio and electro magnetic interference.

     In March a major US utility company agreed to purchase $2 million  worth of RuggedSwitch and RuggedRouter products for about 300  substations over the next four years. The units will be used to create secure communications networks for use in substation automation  and smart grid applications, according to a company press release,  dated March 17. The document did not disclose the name or location of the utility company.

      A router is a high-speed highway for transporting packets of  information among a network of computers, and a switch acts  as a bridge between the highway segments. Similar to the Internet, the smart  grid is designed to isolate disruptions and prevent cascading events.

      So far, RuggedCom has lassoed 40 percent of the worldwide  substation market, according to Manish Grigo, research analyst at Toll Cross Securities, Inc., in Toronto, because the hardware  is outperforming that of its competitors. He recommended the  company’s stock as a buy.

      RuggedCom of Woodbridge, Ontario,  competes with Cisco Systems (CSCO: NASDAQ), Inc., of San Jose, Calif., and GarrettCom, Inc., of Freemont, Calif., among others.

      The company’s fundamentals are strong, said Grigo,  even though share price has fluctuated lately. Over the  past 52 weeks, share price soared to $26.29 from $8.87,  according to Bloombergan 86 percent return.

     “I would expect some lumpiness along the way,” Grigo  said. “But if someone is in it for the long-term, you definitely  will benefit from this stock.”

      Utility companies test equipment extensively before  making a purchase, he said, and typically  stagger their purchases over several years. Therefore, once a company settles on a supplier, utility officials  will likely continue to buy from it.

     “They don’t upgrade their entire network all at once,” he said.  “They do it over 5 and ten year periods, so they will be customers for the long haul.”      Company officials will announce fiscal 2010 second quarter  results, ending September 30, today. (Nov. 5) At the end of its first  fiscal quarter on June 30, profits were up 26 percent from the  comparable quarter a year earlier and net income was $0.9 million,  representing the seventeenth consecutive quarter of profitability,  according to a company announcement.

      “Customers are spending millions on RuggedCom’s technology,”  Grigo said. “To me that speaks volumes about their product.”

    Joyce Pellino Crane writes at wordtrope.com/blog. She is a Boston Globe correspondent and a business technology analyst for Trender Research. Follow her on Twitter: Wordtrope.


  1. I do own Ruggedcom, but am only comfortable owning it because I’m also hedged against a general market decline.
    We have to talk about something… I like ruggedcom better than most stocks, but that does not mean that it’s a buy at current prices.


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