This column is for investors willing to take more risk and potentially receive more reward.  The stocks mentioned in this column are not recommended to buy or sell.  They're brought to your attention so you can investigate them further to determine if they fit your risk profile.  Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings.  And some will have tremendous stories.

August 8, 2008 - Websense, Inc. (WBSN-NASDAQ) develops and markets Web filtering solutions that help organizations in managing their networks and computing resources. Its solutions also enable organizations to protect the employees and confidential information from external Web-based attacks, such as spyware and phishing; and analyze, report, and manage how employees use computing resources and the Internet.

In addition, the company provides Websense Content Protection Suite, an integrated information leak prevention solution that protects against information leaks and data loss by identifying and categorizing data, as well as monitoring the movement of data in communications channels, including e-mail, instant messaging, Internet, and Web-based mail. Websense, Inc. distributes its products through distributors and value-added resellers in North America, as well as through a multitiered distribution network of distributors and resellers internationally. It has operations primarily in the United States, Canada, Latin America, Europe, the Middle East, Africa, and the Asia Pacific. The company was founded in 1994 and is headquartered in San Diego, California.

If you've ever had a computer infected with the latest virus, one that is new to the virus protection services, then you know how important anti-virus software is. It can take days or even weeks to uninfect a machine, all the while, the computer slows and won't function properly. The demand for programs that Websense provides will only go up as more viruses (viri?) continue to plague computer users.

Analysts predict earnings will hit $1.34 this year, up from 95 cents last year. Next year, they see $1.44. Earnings for the September quarter are estimated at 32 cents a share, then for the last quarter of the year, 29 cents. In each of the last 4 quarters, earnings were a positive surprise, beating analysts' estimates by 9.1%, 21.7%, 16.7%, and 19.4% respectively. In the last 5 years, earnings grew, on average 29.6% a year. The next 5, analysts see 13.33% a year, on average.

Revenues are expected to jump by 45.5% this year, to $344.41 million, up from $236.82 million. Next year, expect a more tepid 4.4% gain to $359.73 million. Improvements will come from international growth, a larger number of subscribers, high customer renewal rates, and product enhancements. International interest should focus on Asia/Pacific, Europe, and Latin America. The company maintains over 50,000 customers, including over half the Fortune 500. It has over 2000 distributors and strategic partners worlwide, ones like AT&T, GE Capital and technological partners such as Cisco, Microsoft and Novell.

While there's a greater need than ever for Websense's product line, there's also increased competition and pricing pressures in the information security field. However, the company has been adamant about cost cutting in the form of a recent restructuring. With a focus on renewing existing customers as well as expanding its markets (internationally in particular), the company should see continued solid earnings growth.

More numbers: Market cap is $992.32 million with 45.132 million shares outstanding. Price to sales ratio is 3.94. Price to Book is 5.37. Return on Equity was 14.4% last year. Debt to equity is .84. There were 4.89 million shares short at the end of July, about 12.5% of the float. There is no dividend.

WBSN has seen its price erode from a high of $34.90 at the end of 2005 (adjusted for a 2 for 1 split early in 2006) to its current level. It has been a little lower, reaching $15.40 this year. Now it's rebounding, up over 40%. If its new market efforts internationally pay off, coupled with its new, streamlined organization, it just might continue that streak of surprising analysts with better than expected earnings.

- Company Web site: www.websense.com

- Ted Allrich