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With terrorists still running around and calls going up from the floor of Congress about U.S. intelligence failures, the time was right for an initial offering by a company that sells surveillance and computer security products.

So it was on the first day of trading for



, whose shares were priced at $16, opened at $18 and ended the day at $18.15 on 6.7 million shares traded.

The Arlington, Va.-based company specializes in national security programs, primarily for the intelligence community, the Department of Defense, law enforcement and other government agencies.

Analysts say that as long as terrorism remains the country's preoccupation, shares of a company that does more than 80% of its business with the U.S. defense and intelligence agencies will probably have legs.

"It's all timing," said David Menlow, president of

Veridian underwriters CS First Boston and co-managers Wachovia Securities, CIBC World Markets and SG Cowen, increased the initial offering from 13.5 million shares from 12.5 million shares. The IPO was priced in the $15 to $17 per share range.

Menlow said defense contractors are the "sweethearts" of the marketplace right now due to the high emotions bred by the ongoing terrorists' threats. As President Bush makes regular statements of how the government will continue to hunt down terrorists, a maker of technology used for intelligence work might appear to be poised for growth.

But Menlow warns such sentiment may not last forever.

"Most defense stocks are doing well. But if we catch Osama, the defense stocks will fall apart like a cheap watch. That's why I have problems with the emotionalism. Osama my not be the only source of terrorism, but this is a very emotional market," Menlow said.

Richard Peterson, an analyst with FirstCall, agreed that Veridian is benefiting from the increase in defense spending. But in the long term, his concern is whether the sector is attracting too many players for all of them to remain profitable.

"The technology/intelligence/security industry is getting crowded," Peterson said, noting that some of the larger, older defense contractors are expanding their technology for intelligence and security work as well.

Another issue is Veridian's earnings. Though revenue has risen year over year, the company was losing money until fairly recently. For the three months ending March 31, 2002, the company reported revenue of $176.6 million and net income of $3.6 million, up from revenue of $162 million and a loss of $1.1 million for the same period in 2001.

In a conference call this morning, Veridian CEO David Langstaff said the previous losses were due to accounting charges but that the company is expected to profitable from now on.

Veridian said its competitors include divisions of large defense contractors such as


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Computer Sciences



Jacobs Engineering

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Lockheed Martin

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Northrop Grumman

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and others.