Based on preliminary information available at this time, revenue for the fourth fiscal quarter is expected to be approximately $9.4 million, compared to previous guidance of $12.0 to $13.0 million. Sales and marketing, research and development, and general and administrative expenses are expected to be approximately $14.0 million compared to previous guidance of $14.0 to $15.0 million. Cash and short-term investments at September 30, 2005 were $153.5 million compared to $177.8 million at June 30, 2005, a decline of $24.3 million, of which $21.0 million was the cash consideration used in the acquisition of Protocom in August 2005.

"We are disappointed with the shortfall in our revenue this quarter. Several orders in the U.S. Federal Government and in Europe were delayed and did not close during the quarter as expected. Additionally, even though we received the cash payment from our Novell OEM agreement as expected, we were only able to recognize a small portion of the payment as revenue due to certain U.S. GAAP purchase accounting considerations," said Ben C. Barnes, Chief Executive Officer of ActivCard. "During the quarter we made improvements in our overall cost structure allowing us to reduce expenses, completed the integration of Protocom, and executed a reduction in force as part of our planned and ongoing restructuring," continued Mr. Barnes.