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Spyglass filtering for future gold

The makers of SurfWatch hope a surge in filtering software sales will help it weather a strategy shift.

    While a shift to the Internet device market from the desktop market has deteriorated Spyglass's (SPYG) revenues, one seed of business is sprouting thanks to the downfall of the Communications Decency Act.

    In a filing with the Securities and Exchange Commission yesterday, the company said it expects its revenues may be adversely affected during fiscal 1997 and 1998 as it continues to direct its business strategy to the Internet device market, rather than vendors of desktop software applications.

    But all is not doom and gloom for the company. The overturn of the Communications Decency Act may have sparked interest in filtering software. Spyglass spokesman Jay Friedland said 3.4 million copies of Spyglass's SurfWatch filtering product had been downloaded in the quarter prior to the vote on the CDA; by the end of the June quarter, 7.2 million copies had been downloaded.

    While the CDA vote came just days before the end of Spyglass's quarter, the anticipation and overall awareness generated by the CDA sparked interest in those that wanted to control of their own Internet experiences.

    "It is hard to say there is a direct correlation [between the jump in business and the CDA], but the climate was moving in that direction," Friedland said. "July and August, which are traditionally slower months, have had a pretty significant increase in business. Parents, education, and corporations are concerned about liability for sexual harassment, productivity, and bandwidth, and [filtering software] solves all three."

    In its most recent quarter, Spyglass reported a net loss of 45 cents a share, compared to profits of 7 cents a share a year earlier. Revenues fell 63 percent to $2.2 million, compared to revenues of $6 million for the same period a year earlier.

    The company also said it expects to significantly increase spending in product development, marketing, and sales to position itself as a leader in the Internet device market, which should negatively impact net income during fiscal 1997 and 1998.

    Elsewhere, Spyglass isn't the only company benefiting from the high court's decision to put the power of monitoring content into the people's hands.

    "We have seen a drastic change," said Gordon Ross, president of Net Nanny. He said the overturn of the CDA fueled an increase not only in filtering software for the Net, but more importantly, the widely followed decision sparked an interest in other security-related issues. "People want to know how to protect their private information too."

    "The 'old library' was totally restricted to what was inside the building, but the digital library is open to the world?There is nothing better than good parenting, and there are products that can help," he said.

    Net Nanny recently released its corporate product Net Nanny Pro, and is working to develop a product based on keystroke dynamic technology, which uses an individual's unique typing patterns to limit access to the designated user.

    Spyglass is like an OEM to Internet service providers, noting that many ISPs offer filtering software to customers for free or for a small additional fee. Friedland said the company is getting ready to announce two new major Internet partners in the coming weeks.