CERTICOM REPORTS RESULTS FOR SECOND QUARTER OF FISCAL 2008

Pipeline of potential recurring revenue continues to strengthen

English webcast French webcast

Highlights for the Quarter:

  • Sony answered Certicom's patent infringement complaint; Certicom remains confident in its legal position
  • Certicom launched Security Builder API for .NET
  • Sicon Semiconductor licensed Certicom’s technology for digital content protection
  • Frost & Sullivan awarded 2007 Product Innovation Award to Certicom
  • Vaultus Mobile Technologies licensed Certicom’s ECC technology for mobile enterprise applications
  • Certicom opened design centre in Silicon Valley, to be dedicated to development of hardware-based cryptographic technologies

Subsequent to Quarter End:

  • Texas Instruments licensed Certicom’s ECC technology for improved security in next generation government-issued identification documents
  • Bally Technologies licensed Certicom technology for gaming security
  • Kilopass and Certicom to partner for delivery of security for digital content protection
  • IdentiPHI licensed Certicom’s ECC technology for new security products for businesses and government agencies
  • Certicom’s Suite B Power Bundle to support Cavium Networks’ processors

Mississauga, Ontario (December 4, 2007) – Certicom Corp. (TSX: CIC) (“Certicom” or the “Company”) today reported results for the second quarter of fiscal 2008 ended October 31, 2007. All figures are in U.S. dollars and in accordance with Canadian Generally Accepted Accounting Principles (GAAP) except where otherwise noted.

Revenue for the quarter was $3.8 million compared to $5.9 million for the second quarter of fiscal 2007. For the first six months of fiscal 2008, revenue was $7.0 million, compared to $10.6 million in the first six months of fiscal 2007.

“While we are disappointed with the revenue for the first half of the year, I will reiterate that we have not lost any prospective deals for this time period,” said Bernard Crotty, Certicom’s President and Chief Executive Officer. “Our pipeline of opportunities continues to grow by quantity and quality. As the Texas Instruments and Bally Technologies agreements demonstrate, leading technology companies are embracing Certicom’s complete security solutions.”

Mr. Crotty continued, “As we stated in our pre-release last month, our second quarter revenue fell short of expectations due to a combination of factors. These included the complex nature of the strategic deals we focus on and our product development shift towards total security solutions. I will point out again that we may encounter revenue variability, including upside variability, over the next few quarters as we adapt to changing market dynamics, progress through the Sony patent litigation case, and proceed with executing our growth strategy.”

SECOND QUARTER FINANCIAL REVIEW

Operating expenses1 for the quarter were $5.0 million, compared to $4.6 million in the second quarter of fiscal 2007. The increase in year-over-year operating expenses was mainly due to legal expenses related to the Sony litigation. However, the operating expenses were lower than the guidance given in the previous quarter due to lower than expected litigation expenses, which totaled $0.4 million for the quarter. The Company posted a net loss on a GAAP basis of $2.8 million, or $0.06 per basic and diluted share for the quarter, compared to net earnings of $0.6 million, or $0.01 per basic and diluted share in the second quarter of fiscal 2007.

The Company reports that recurring revenue for the second quarter was $2.0 million, consistent with $2.1 million in the second quarter of fiscal 2007.

Certicom had $40.4 million in cash2 at quarter-end compared to $43.2 million at year-end fiscal 2007 and $44.4 million at October 31, 2006. The Company has no debt.

SIX MONTH FINANCIAL REVIEW

Operating expenses1 for the first six months of fiscal 2008 were $10.7 million compared to $9.0 million for the same period last year. The increase in year-over-year operating expenses was mainly due to legal expenses related to the Sony litigation and a planned increase in product development resources specifically related to new product initiatives.

For the first six months of fiscal 2008, the Company posted a net loss on a GAAP basis of $6.2 million or $0.14 per basic and diluted share, compared to a net loss of $0.7 million, or $0.02 per basic and diluted share for the same period last year.

The Company reports that recurring revenue for the six-month period was $4.0 million, consistent with $4.1 million for the same period in fiscal 2007.

UPDATE ON SONY PATENT INFRINGEMENT LITIGATION

Sony answered Certicom's patent infringement complaint on August 31, 2007, denying infringement and asserting invalidity. Certicom remains confident in its legal position and in its ability to successfully pursue this litigation.

In pursuing the Sony litigation, Certicom management expects to receive a reasonable royalty on the sales of Sony products that Certicom alleges use its ECC technology in content protection technologies, such as Advanced Access Control System (AACS) and Digital Transmission Content Protection (DTCP).

Certicom is currently progressing through the broad discovery phase in which both parties are required to provide certain documentation.

CEO SEARCH

The Company expects to make an announcement regarding the appointment of Certicom’s new CEO by December 31, 2007.

OUTLOOK

Management intends to continue its focus on leveraging Certicom's global leadership position in ECC to build recurring revenue and sustainable profits. The Company is committed to five key strategies for maximizing market share: partnering for continued ECC adoption, expanding its global sales presence, investing in new product development, pursuing acquisitions, and defending its patent portfolio.

Operating expenses1 for the second quarter of fiscal 2008, excluding cost of revenues, depreciation and amortization, and stock-based compensation, are expected to range from $6.1 to $6.5 million, including estimated legal expenses ranging from $0.6 to $1.0 million associated with intellectual property protection. Management continues to aggressively manage expenses to achieve a cost structure that is in line with revenue, which is key to Certicom's goal of achieving sustainable, profitable growth.

CONFERENCE CALL

Conference Call and Webcast

December 5, 2007, 11 a.m. ET (8 a.m. PT)

Participant Numbers

416-644-3414 or 1-800-733-7571

The conference call will be webcast live with supporting slides and subsequently archived at ecommerce.certicom.com. To listen to the webcast, participants will require Windows Media Player™ which can be downloaded from Certicom’s website prior to the event. An archived recording will be available from 12 p.m. (ET) on December 5 until 12 a.m. (ET) on December 12, 2007. To access the archive, please call 416-640-1917 or 1-877-289-8525 and enter passcode 21251970#.

ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS

Certicom will hold its Annual and Special Meeting of shareholders on Thursday, September 20, 2007 at 10 a.m. (ET) at The Gallery of the TSX Broadcast & Conference Centre located at The Exchange Tower, 130 King Street West in Toronto. The meeting will be webcast live with supporting slides on Certicom’s web site at www.certicom.com.

Consolidated Balance Sheets

Consolidated Statements Of Operations And Retained Earnings

Condensed Consolidated Statements Of Cash Flow

Consolidated Statements of Comprehensive Gain

ABOUT CERTICOM

Certicom protects the value of content, applications and devices with government-approved security. Adopted by the National Security Agency (NSA) for government communications, Elliptic Curve Cryptography (ECC) provides the most security per bit of any known public-key scheme. As the global leader in ECC, Certicom security offerings are currently licensed to more than 300 customers including General Dynamics, Motorola, Oracle, Research In Motion and Unisys. Founded in 1985, Certicom’s corporate offices are in Mississauga, Ontario, Canada with worldwide sales and marketing headquarters in Reston, Virginia and offices in the U.S., Canada, Europe and China. Visit www.certicom.com.

# # #

Certicom, Certicom Security Architecture, Certicom Trust Infrastructure, Certicom CodeSign, Certicom KeyInject, Security Builder, Security Builder API, Security Builder BSP, Security Builder Crypto, Security Builder ETS, Security Builder GSE, Security Builder IPSec, Security Builder NSE, Security Builder PKI and Security Builder SSL are trademarks or registered trademarks of Certicom Corp. All other companies and products listed herein are trademarks or registered trademarks of their respective holders. Information subject to change.

ENDNOTES:

1 This news release contains references to operating expenses. Certicom defines operating expenses as total operating expenses excluding cost of revenues, depreciation and amortization and stock-based compensation. It also excludes interest income, other income (expense) and withholding tax expense.

 

THREE MONTHS ENDED

October 31,

 

SIX MONTHS ENDED

October 31,

 

2007

 

2006

 

2007

 

2006

Sales and marketing

$1,796

 

$ 2,299

 

$ 3,995

 

$ 4,371

Product development and engineering

1,560

 

1,277

 

3,409

 

2,773

General and administrative

1,687

 

1,012

 

3,302

 

1,901

Total operating expenses

$ 5,043

 

$4,588

 

$ 10,706

 

$ 9,045

2 This news release contains references to cash, which is defined as cash and cash equivalents, short term marketable securities and long term marketable securities.

 

 

October 31, 2007

 

April 30, 2007

Cash and cash equivalents

$2,807

 

$3,397

Marketable securities

26,935

 

26,752

Long-term marketable securities

10,644

 

13,013

Total Cash

$40,386

 

$43,162

Except for historical information contained herein, this news release contains forward-looking statements that involve risks and uncertainties. Forward-looking information includes information concerning the Company's future financial performance, business strategy, plans, goals and objectives. When used in such documents, the words "plans", "expects", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", "will", "believes" or variations of such words and phrases often, but not always, identify forward looking statements. Factors which could cause actual results or events to differ materially from current expectations include, among other things: the ability of the Company to successfully implement its strategic initiatives and whether such strategic initiatives will yield the expected benefits; the ability of the Company to develop, promote and protect its proprietary technology security breaches or defects in the Company's products; competitive conditions in the businesses in which the Company participates; changes in consumer spending; the outcome of legal proceedings as they arise; general economic conditions and normal business uncertainty; consolidation in the Company's industry and by its customers; customer preferences towards product offerings; the risk that customers may cancel their contracts with the Company; reliance on a limited number of customers; demand for ECC-based technology; performance of the Company's management team and the Company's ability to attract and retain skilled employees; operating the Company's business profitably; fluctuations in revenue and foreign currency exchange rates; interest rate fluctuations and other changes in borrowing costs; the ability to develop and maintain strategic relationships; and other factors identified under the heading "Risk Factors" in the Company's annual information form dated July 26, 2007 and filed on SEDAR at www.sedar.com.

While the Company believes that its forecasts and assumptions are reasonable, results or events predicted in this forward-looking information may differ materially from actual results or events. In particular but without limitation, there is no assurance that the Company will achieve all or a portion of the goals outlined in its fiscal 2008 business plan within the time limits specified therein or at all.

For further information, please contact:

Investors and Financial Analysts:
Hervé Séguin
Chief Financial Officer 
Certicom Corp. 
(905) 501-3827
hseguin@certicom.com
Media:
John Callahan
Director, Public Relations & Marketing Communications
Certicom Corp.
(703) 234-2357
jcallahan@certicom.com