SafeNet Reports Second Quarter Financial Results

Company Reports a 137% Increase in Revenues; Earnings Exceed Higher Guidance SafeNet Raises Pro Forma EPS Guidance for 2002 to $0.22 to $0.25

BALTIMORE, Maryland -- July 18, 2002 -- SafeNet (Nasdaq: SFNT), a leading provider of Internet security technology that is the de facto standard in the VPN industry, today announced results for the second quarter ended June 30, 2002.

Revenues for the three-month period were $7.4 million, compared to $3.1 million for the same period in 2001, an increase of 137%. On a sequential basis, revenues increased by 21% from the first quarter of 2002. The pro forma net income for the 2002 second quarter was $440,000, or $0.06 per diluted share, compared to a pro forma net loss of $412,000, or $0.06 per share, for the quarter ended June 30, 2001. The quarterly pro forma amounts in 2002 exclude losses from discontinued operations, amortization of acquired intangible assets, and assumes a tax expense using a 35% tax rate.

The reported income from continuing operations for the quarter ended June 30, 2002, was $326,000, or $0.04 per diluted share, which compares to a reported loss from continuing operations for the same period of 2001 of $1.5 million, or $0.21 per share. The reported net loss, inclusive of the effect of discontinued operations was $72,000, or $0.01 per share, for the 2002 second quarter, which compares to a reported net loss of $2.8 million, or $0.39 per share, for the same quarter of last year.

Anthony Caputo, Chairman, and CEO of SafeNet, noted, "Our strong top-line and bottom-line results are a reflection of our customers' increasing appetite for quality security solutions. We are also capitalizing on the advantages of our unique distribution strategy, focused on all segments of the security solutions market."

"This quarter, we announced a new, multi-million-dollar contract that extended our strong base with the Defense Department and gave us an entry point into two new defense markets--homeland and classified level security. Our recently announced deals with Microsoft and Palm Source are a testament to the fact that our VPN client software has become the solution of choice for OEMs who want to provide consumers with the best possible security."

He added, "Clearly, our business prospects are expanding, especially in areas that are strategic to our long-term growth and future profitability."

Business Updates

During the second quarter of 2002, SafeNet announced several new and enhanced products and several major contracts. Some of the highlights were:

• The Department of Defense (DOD) awarded a multi-million dollar contract to SafeNet for the development of high assurance, IPSec Application Specific Integrated Circuit (ASIC) devices.
  
• Microsoft Corporation licensed SafeNet's SoftRemote VPN client software for users of Microsoft Windows 98, Windows Millennium Edition, and Windows NT Workstation desktop operating systems.
  
• PalmSource, Inc. selected SafeNet as a VPN security partner and signed a license agreement for PalmSource to distribute an evaluation version of SoftRemotePDA™ for the Palm OS® 5 platform to licensees.
  
• SafeNet announced the availability of the VPN InterOp Toolkit, another component to its CGX Security Platform; making SafeNet the only security vendor offering one, complete security solution.
  
• The new SafeXcel-1141 and 1741 chips were made commercially available--both are Momentum Series silicon products that are part of the SafeNet CGX Security Platform.
  
• SafeNet introduced the latest version of its award-winning VPN remote access client software, SoftRemote 8.0 with features such as Microsoft® Windows® XP compatibility and support for Network Address Translation (NAT) Traversal.
  
• CyberGuard Corporation began deploying the SafeXcel 241-PCI card into its KS and SL line of firewall/VPN appliances, and offering SoftRemote® to its customers for a complete and secure remote access solution.
  

Current Outlook for Third Quarter and Full Year 2002

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.

SafeNet's forward guidance excludes amortization of acquired intangible assets, losses from discontinued operations, and assumes a tax expense using a 35% tax rate.

For the quarter ending September 30, 2002, SafeNet currently expects to achieve revenues in the range of $8.6 to $8.8 million, an increase of 16-19% compared to the second quarter 2002 revenues of $7.4 million. The pro forma net income is expected to be in the range of $0.07 to $0.09 per diluted share compared to a pro forma net income of $0.06 per diluted share for the second quarter of 2002.

For the year ending December 31, 2002, the Company expects to achieve $32 million, the high end of the prior revenue guidance, which represents a 95% increase over 2001. Consequently, pro forma EPS guidance has been raised to a range of $0.22 to $0.25 per diluted share.

About SafeNet, Inc.

SafeNet, Inc. (Nasdaq: SFNT) has set the industry standard for virtual private network (VPN) technology and secure business communications. With more than 18 years experience in developing, deploying, and managing network security systems for the most security-conscious financial institutions and government organizations around the world, SafeNet's proven technology has emerged as the de facto industry standard for VPNs. SafeNet created the first Internet VPN system, which has evolved into the only encryption platform to meet every security need in every product category. SafeNet security solutions, based on SecureIP Technology™, and part of the CGX Security Platform, have become the products of choice for leading Internet infrastructure manufacturers, service providers, and security vendors. With SafeNet securing the infrastructure of today's e-business communications as well as leading the way in government Homeland and classified data security, the company has opened new markets for interoperable, secure, and deployable VPN communications. Commercial customers include Texas Instruments, Microsoft, Samsung, Centillium Communications, ARM, and Cisco Systems. Government customers include U.S. Department of Defense, U.S. Internal Revenue Service, and the Social Security Administration. For more information, visit http://www.safenet-inc.com/ .

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995
Statements in this release concerning SafeNet's future prospects are "forward-looking statements" under the Federal securities laws. There can be no assurance that future results will be achieved, and actual results could differ materially from forecasts, estimates, and summary information contained in this news release. Important factors that could cause actual results to differ materially are included but are not limited to those listed in SafeNet's periodic reports and registration statements filed with the Securities and Exchange Commission. The Company assumes no obligation to update information concerning its expectations.

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Editor's Note: SafeNet and SoftRemote are registered trademarks and SafeXcel, SoftRemotePDA, and SecureIP Technology are trademarks of SafeNet, Inc. All other trademarks are the property of their respective owners.