INTERIM REPORT January 1 to March 31, 2000

INTERIM REPORT January 1 to March 31, 2000 F-Secure Group reports 102% growth for Q1 2000 Investment phase over - revenues starting to outgrow costs Revenue for the F-Secure Group in Q1 2000 was 8.1m euros, compared to 4.0m euros in Q1 1999. This represents a 102% year-to-year organic growth and 3% growth on the previous quarter. Operating result was 5.1m euros negative (-0.4), of which the business related operating loss was 4.0 million and social costs related to the provisions for the option plan 1.1 million. Development of revenue and operating income After better than expected December sales, the Y2K issue affected the Group's revenue negatively after the turn of the Millennium. As expected, January and February sales were low, and sales got back on track only in March. Still, quarterly revenue grew to 8.1m euros (4.0m). The negative operating result of -5.1m euros was a result of continuing investment in building the sales and marketing organization as well as establishment of new distribution channels. It also includes a 1.1m euro increase in the provision for social security costs to be paid in the future resulting from the Group's Stock Option Program for all outstanding st options on 31 March 2000. The provision for the social security costs of U.S. options, which are now included for the first time, have been listed as extraordinary items because of the change in accounting practice. In the future these costs will be booked as personnel expenses. The options st have been valued at the market price prevailing on 31 March 2000. In addition to the revenue shown, the Group has 8.6m euros (6.3m) of deferred revenue on its balance sheet. The deferred revenue is a result of existing support contracts where the actual support activity will only take place in months to come. The geographical breakdown of the revenue was as follows: North America 41%, Nordic Countries 26%, Rest of Europe 23%, and Rest of the World 10%. Anti-Virus products represented 53% of the revenue, encryption 46%, and other products 1%. The Group expects that the next quarters will show decreasing losses, as the increasing revenue stream will outgrow costs. Security as a Service showing signs of success, first steps in wireless security The Group's Security as a Service concept has been proven on the market during this spring. The concept was field tested with service provider partners of various types: the ASP (Application Service Provider), the ISP (Internet Service Provider) and the outsourcing company environments. The Group expects to sign 10-20 significant Security as a Service partnerships during the year 2000. The revenue target for this year is set at 3% of the Group's revenue. In 3-5 years the Security as a Service business should grow to represent more than 40% of the Group's revenue. The Group also advanced on the mobile security front and more R&D resources were directed to this area. On January 27, the Group announced a partnership with Hewlett-Packard to provide a WAP (Wireless Application Protocol) Anti-Virus Gateway. The acquisition of Modera Point, a company specializing in the EPOC wireless platform, was under preparation during Q1 and finalized on April 3. The Group expects to announce further major wireless partnerships during this year and new wireless products during the summer. Personnel and organization The Group's personnel grew to 350 (from 302 at the end of 1999). During the first quarter, the Group established new offices in New York, NY, and Chicago, IL, and a Swedish subsidiary was set up in Stockholm. The Canadian office was moved from Calgary to Toronto and the Group launched an R&D unit in Tampere, Finland. Financing The Group's financial position remained strong during the quarter. The Group's equity ratio on March 31 was 69.2 % (compared to 45.1 % at the end of Q1 1999). Interest income was 0.1m euros (0.3). The liquid assets of the Group on March 31, 2000 were 48.5m euros. Investments The Group's investments were 1.1 m euros (0.3). The investments were mainly in IT hardware and software. Key events after the reporting period On April 3, F-Secure Corporation agreed to acquire privately-held Modera Point Oy of Oulu, Finland. Modera Point develops solutions on new mobile platforms. The employees of Modera Point formed the core of F-Secure's new Wireless Security Competence Center. On April 12, F-Secure Corporation announced a partnership with Cisco Systems and iD2 Technologies to build a European VPN solution. Future outlook The Group expects that the next quarters will show decreasing losses, as the increasing revenue stream will outgrow costs. The Group expects to sign 10-20 significant Security as a Service partnerships during the year 2000. The revenue target for this year is set at 3% of the Group's revenue. In 3-5 years the Security as a Service business should grow to represent more than 40% of the Group's revenue. The Group also expects to announce further major wireless partnerships and new wireless products during this year. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/05/19/20000519BIT00040/bit0001.doc The full report http://www.bit.se/bitonline/2000/05/19/20000519BIT00040/bit0002.pdf The full report