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Wave Systems Breaking Out or Down?

( Updated to reflect $6.3 million raised in 2009 offerings)

LEE, Mass. ( TheStreet) -- Wave Systems' (WAVX - Get Report) stock has surged 730% over the past year, evidence it has its fair share of believers it is poised to dominate the emerging hardware-based digital-security space with a very large addressable market.

But to sway bearish investors expecting a break down in share price, Wave Systems first needs to bury its history as a serial stock issuer. To accomplish this, it is evangelizing the technology to make consumers and corporations understand that built-in digital security is available at a flick of a switch and that it offers a cheaper, better performance than that of software-based security solutions.
Stocks under $5

For the better part of the last decade, Wave Systems shares have languished below the $5 mark, partly due to the company's frequent need to issue stock in order to fund research and development of its security technology. In the first few months of 2009, Wave Systems launched four separate stock offerings totaling nearly $6.3 million.

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"We certainly raised a lot of capital aggressively in the past, but we were relatively efficient in the raising of capital," Wave Systems CEO Steven Sprague told TheStreet. "But that's the old story of getting to where we are now."

Now, Sprague says, Wave Systems is funding its future development off revenue the company creates, rather than funding research and development through investors. Key to its success is partnerships with a veritable who's who of the technology space: Dell (DELL), Hewlett-Packard (HPQ - Get Report), Intel (INTC - Get Report), Samsung and Seagate Technologies (STX - Get Report).

This shift came thanks to a greater awareness by consumers and corporations of the need for better performing, cheaper digital security. Consider several media reports where valuable data was stolen along with a computer, like when government officials lost laptops containing classified information.

"People are beginning to take security more seriously, and we have a regulatory environment driving this," Sprague says. "There are now fines if you lose a laptop that contains private information that is not encrypted. There are some pretty substantive data protection laws that are forcing every organization to make sure the laptops and desktops that they have are protected."
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