Driven by a convergence of market factors, Absolute further solidified its leadership position in the mobile computer security market during fiscal 2007. This year’s financial performance provides a strong validation of our Software-as-a-Service (“SaaS”) business model and demonstrates our ability to take advantage of the largely under-penetrated mobile theft-protection market. Our subscriber base more than doubled over last year to 1.6 million - driving a 110% increase in sales contracts and 302% increase in cash from operations. Based on this growth, we have recently increased our
subscriber target to exceed four million by June 30, 2009.

The Evolution of a Standard

Over the past three years, we have significantly advanced our industry-standard mission and have proven our capability across a broad customer base. This year we reached an inflection-point in terms of the number of investors, analysts, media, computer manufacturers and most importantly customers, that are embracing the market category for secure asset tracking, data protection and computer theft recovery. This is a market that Absolute invented, developed and now dominates.

Proven Platform

I am confident that we have created a credible platform to drive mass adoption in the mobile theft-protection marketplace. Year after year, we have proven the capability of our platform by successfully building a scalable and trusted SaaS infrastructure, delivering valued solutions to 1.6 million computers under subscription, recovering over 3,600 missing computers and protecting countless data records from becoming compromised. In the process, we have increased our embedded footprint to 70 million computers, created win-win relationships within our partner ecosystem and built a first class team. As demand continues to accelerate, we will focus on responding to the needs of this market and our partners with the precision and effectiveness our stakeholders have come to depend upon.

Mobility and Legislation Accelerate Demand

The computing market across all user verticals has clearly spoken – they want mobility with access to data, email, work files, music, pictures, etc. – all to be available anytime, anywhere. This is a fantastic trend for productivity and communication, but it has also created significant security and management challenges.

Meanwhile, regulatory bodies have been adding legislation to protect personal and proprietary information from falling into the wrong hands – a risk that has increased substantially with adoption of mobile computing. Thanks to the new data breach notification requirements, we now know that within government and corporate segments, nearly 40% of compromised personal data records are from lost or stolen laptops. Individuals and organizations, who do not take steps to protect the data stored on their computers, may now face significant liabilities as a consequence.

The message is clear: mobile computing requires layered security measures to deal with this epidemic, including measures such as policy management, encryption, authentication, physical protection, and our Computrace^®LoJack^® computer tracking, data protection and theft recovery solutions – the only persistent software solution that can enable users to take action after they lose control of their computers.

Customer Focus

We pride ourselves on delivering value-added, highly effective and reliable security solutions to all our subscriptions from individual consumers to multinational organizations. Responding to our customers’ needs with a sense of urgency is the focal point of our operations. Their protection is our paramount objective. One example is our Theft Recovery Team who operates with unrivaled tenacity in their pursuit to recover customers’ computers and help police solve these crimes.

I can say with confidence that we have saved thousands of customers from the damage, embarrassment, costs and frustration that just one stolen computer can cause. In return, our customers have rewarded us with their trust, business and support.

Partner Ecosystem

In addition to our customer focus, we have also created win-win opportunities with our technology and distribution partners. To date, we have focused on the computer manufacturers who have provided us with sales, marketing and distribution support. Computrace-embedded BIOS support is a direct result of the value we have been able to deliver to both computer manufacturers and our mutual customers.
With the increasing adoption of our solutions and the extensibility of our technology platform, we see opportunity to expand our existing relationships and to develop partnerships with new industry leaders in the security software, service and technology markets.

Sustainable Competitive Advantage

While we believe that there will always be competition from other solutions to address data and computer loss, we also believe that most of these will continue to be more complementary than competitive.

Encryption is a perfect example. We’ve seen our enterprise customers adopt both our Computrace and full disk or folder-based encryption to get a solid lock on data protection. Encryption and other solutions are vulnerable to the human element (training, adoption, internal theft, etc.) and do not provide persistent post-loss communication and intelligence. Our solutions fill the gaps in both of these areas, providing an even more robust and reliable solution when combined.

From a competition perspective, we rely on our embedded position, proven track record, subscriber base, patent portfolio and talented theft recovery and customer service teams to provide a sustainable competitive advantage. These barriers have been very successful to date, and we believe they will continue in the future.

Absolute Growth

We will strive to work toward accelerating adoption of our existing solutions. We are also focused on three other key initiatives to extend our growth curve: first, additional new security and management solutions that can be delivered from our position in the Firmware layer; second, to extend our embedded position in other components, such as hard drives or chipsets; and third, introducing wireless and handheld security solutions.

Thank You

In closing, I would like to extend a sincere thanks to our employees for their innovation and tireless work, our board of directors for their guidance and our shareholders for their support. I would also like to thank our customers for placing their trust in Absolute to help them manage their mobile security needs and for being ambassadors for our services with industry observers, media and prospects. We look forward to reporting on our progress in the coming year.

Best Regards,

John Livingston
Chairman & CEO

November 9, 2007