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San Diego's Mitek Hopes to Hitch Ride on Tempest

February 23, 1988|CHRIS KRAUL | San Diego County Business Editor

SAN DIEGO — For more than a decade, it has been known that computers and computer peripheral equipment emit electromagnetic signals that can be "listened to" by government and corporate spies, making data highly vulnerable to those sophisticated and unscrupulous enough to steal it.

The problem for the U.S. government in its efforts to protect classified data has been compounded over the past several years by the proliferation of desk-top computers in relatively wide-open office spaces. This contrasts with the times when mainframe computers occupied space in highly controlled environments that were easier to protect from high-tech intruders.

"Every time you keystroke a computer, it gives off a very distinct (electronic) signature," said Julius Jones, director of federal programs at International Data Corp., a market research firm in Vienna, Va. "If you want to crack into someone's business, you pick up on what they are keying in. It is not pushing the state-of-the-art to be able to do it."

Moscow Was a Lesson

The harsh reality of computer espionage received worldwide publicity last year with revelations that the security breach at the U.S. Embassy in Moscow included the apparent theft of computer data by high-powered Soviet listening devices.

Even before the embassy security breach, the U.S. government was taking increased measures to insure that its agencies and contractors used computer equipment that incorporated a government-approved technology called Tempest to help safeguard against unwanted listeners.

In fact, the Tempest computer-equipment market exceeded $1 billion in sales last year and is growing at a 28% annual clip, according to a research report issued last June by Frost & Sullivan of New York.

Some observers say the declining prices for Tempest equipment may soon boost demand for Tempest computers, work stations, printers, disk drives and other products beyond the current growth rate. The Tempest market may even reach $9 billion in annual sales by the early 1990s, some industry sources said.

Although the principal customers for Tempest equipment are now the U.S. government agencies and contractors, some analysts see the market opening up to include corporate customers if incidents of corporate espionage surface.

Anti-Snooping Box

One of the more than 150 U.S. companies now trying to capitalize on the Tempest market is Mitek Systems Inc. of San Diego, which last year reported $7.8 million in sales, mainly from its Tempest modifications to high-speed laser printers. Mitek, in operation for five years, manufactures an electronic box which, when installed beneath the printer, makes it impervious to snooping.

Reflecting the secrecy that enshrouds the Tempest industry, executives at Mitek and other companies declined to discuss their methods of protecting computers from spying.

"We don't want to educate the general public as to the problem," said David Lucien, vice president at Tempest Technologies, a Herndon, Va.-based manufacturer of Tempest printers and a Mitek competitor. "If we explained to everyone how to eavesdrop, we'd compound the problem."

Last year, Mitek encountered rough sailing financially, in part because it is one of many companies competing in the Tempest printer market. Other players include giant Hewlett-Packard of Palo Alto. Last fiscal year, Mitek lost $928,000 and the red ink spilled over into its first quarter ended Dec. 31 when the company reported a $612,000 loss on reduced sales of $1.5 million.

A major Mitek shareholder, John Thornton, last year agreed to convert a $1.5-million loan he had made to the company to equity in order to keep Mitek's shareholder equity in the black.

Still, Mitek executives seem unruffled by the losses, saying new products and new manufacturing relationships with leading original equipment manufacturers (OEM) in the Tempest industry offer bright prospects.

The brightest of those prospects, said President Phillip Thomas, is Mitek's recently introduced Tempest facsimile, or FAX machine, making Mitek one of the few companies to offer such a product. Shipments of the product, which is a Tempest-modified version of a Ricoh, begin this month.

Thomas said the company also plans to introduce a multiplexer that will enhance the networking capability of Tempest computers.

Mitek also has signed an OEM contract recently to supply Tempest technology to computer manufacturer Wang Laboratories, which is often described as the leading Tempest manufacturer. Wang, AT&T and Digital Equipment Corp. are thought to account for nearly half of all Tempest equipment sales.

Thomas would not discuss the dollar value of Mitek's deal with Wang, nor that of similar deals signed recently with Ricoh, Digital Equipment and Alcatel.

Stock analyst Alan Ackerman of Gruntal & Co. in New York said Mitek seemed to be putting the "proper pieces together to build a company in a growth area."

Ackerman added that Mitek's former concentration in the printer area "was a negative for the company. But the new FAX machine will generate a lot of interest and attention over the next few years."

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