News

-Net sales grew of 45.6 % to EUR 15.0 million from EUR 10.3
 million.
-Operating loss for the period was EUR 2.8 million (EUR -0.6
million).
-The number of new license agreements concluded in the third
 quarter, worth more than EUR 50,000 each, was 27, greater than in
 any previous quarter.
-Sales of new products showed a favorable trend. The first
major SSH Certifier agreement was concluded. The report period also
saw several SSH Sentinel agreements. Sales of other products were
at a healthy level despite weaker-than-expected market conditions.
-Investments in research and development as well as marketing
and sales continued in line with the set targets. New product
versions will be launched still in 2001.


KEY FIGURES
                            Q3/01 Q3/00 1-9/01   1-9/00   2000
Net sales, EUR million      4.5     4.4   15.0    10.3    15.6
Net sales, growth %         2.3    76.0   45.6   139.5
Operating result, EUR million-2.1  -0.7   -4.4    -1.0    -1.7
% of net sales            -46.7   -15.9  -29.3    -9.7   -10.7
Operating result, growth %                              -177.2
Profit before extraordinary
items and taxes, EUR million-1.5   -0.6    -2.8   -0.6    -0.9
% of net sales                                            -5.8
Personnel, period-end      186      158    186     158     172

Earnings per share, EUR                  -0,10    -0,02  -0.04
Equity per share, EUR                     1,85     1,22   1.96


NET SALES AND OPERATING RESULT

Net sales for the period totaled EUR 15.0 million (EUR 10.3
million), representing a year-on-year growth of 45.6 percent.
Compared to the second quarter of 2001, third-quarter net sales
developed favorably amounting to EUR 4.5 million (EUR 4.4 million).

Uncertainties continued in the US and European information-
technology markets, the company’s main market areas, affecting the
third-quarter net sales considerably. Customers felt uncertain
about future economic developments, which also made them postpone
IT investments.

SSH’s operating result for the period was EUR -4.4 million (EUR
-1.0 million) while net result was EUR -2.8 million (EUR -0.6
million). The operating result for the third quarter of 2001 was
EUR -2.1 million (EUR -0.7 million) while net result totaled EUR 
-1.5 million (EUR -0.6 million).

Fixed expenses were EUR 16.7 million, whereas a year ago they
amounted to EUR 10.3 million. In the third quarter, the company
continued to conduct a cautious recruitment policy, thus succeeding
in keeping costs under control.

Research and development expenses reached EUR 6.1 million (EUR 4.9
million). The third-quarter R&D expenses were EUR 2.1 million (EUR
1.9 million). During the current financial year, R&D spending has
consistently accounted for approximately 40 percent of net sales.

Sales and marketing expenses for the period amounted to EUR 7.3
million (EUR 3.6 million). In the third quarter, sales and
marketing expenses fell by 7.7 per cent from the second quarter, to
EUR 2.4 million (EUR 1.5 million).

Administrative expenses were EUR 3.3 million (EUR 1.7 million).
Third-quarter administrative expenses were EUR 1.1 million (EUR 0.9
million).

BALANCE SHEET AND FINANCIAL POSITION

Balance sheet total on September 30, 2001 was worth EUR 57.2
million, of which liquid assets accounted for EUR 46.2 million (EUR
28.6 million), or 80.8 percent of balance sheet total. The Group
has no long-term liabilities other than the subordinated loan of
EUR 0.2 million granted by the National Technology Agency (TEKES).

The ratio of net liabilities to shareholders’ equity (gearing)
remained almost on the same level as in the second quarter,
standing at -90.0 percent during the first nine months of the
financial year. Equity-to-asset ratio per September 30th was 93.9% 
(90.1%).

Reported gross capital expenditure for the period reached EUR 0.9
million, including mainly investments in machinery and equipment.

Financial income for the period consisted of interest income from
bank accounts and investment income from commercial papers.
Financial income for the report period amounted to EUR 1.6 million,
whereas a year ago they were EUR 0.4 million.

A total of EUR 0.5 million of product development funding from the
National Technology Agency (TEKES) were entered in other income
from business operations. The Group has two new funding
applications pending which have been submitted to TEKES.

MARKET DEVELOPMENT

The overall uncertainty in the datasecurity and IT markets
persisted in the third quarter. However, the terrorist attacks in
the USA and the subsequent feeling of insecurity have provoked
increased general interest in data security.

In general, SSH’s potential customers are well aware of the
significance of data security. Nevertheless, the buying behavior of
equipment manufacturers, service providers and end-user companies
has changed due to this year’s market uncertainties, and IT
investments, among other things, are now being considered much more
carefully than before.

The third quarter saw no substantial changes in competition and
SSH’s competitive position. The company maintained its position as
the world’s leading developer of Internet Protocol Security (IPSec)
and Secure Shell technologies. The Internet Engineering Task Force
(IETF), which supervises and steers the development of Internet
standards, aims to make IPSec the next-generation standard for over-
the-Internet data security. Technology used in Secure Shell has
already attained an industrial standard position in secure over-the-
Internet remote connections. IPSec Toolkits based on the IPSec
technology, and the Secure Shell product family remained SSH’s main
products.

It is still difficult to forecast market development. Although
markets were less active than anticipated in the third quarter,
they were stronger in late third and early fourth quarter than in
the first half of the year.


SALES DEVELOPMENT
     
Despite the weaker-than-expected market conditions, SSH’s sales
showed a fair development during the report period. Third-quarter
sales performance was more favorable compared with that of the
second quarter. In particular, sales of new products, such as SSH
Certifier and SSH Sentinel, developed favorably. In addition, SSH
concluded a total of 27 agreements worth more than EUR 50,000 each,
which is more than ever before in a single quarter.

Geographically, the USA remained SSH’s main market area. The USA,
Finland, the rest of Europe and other market areas, such as Japan,
accounted for 47.6 percent, 22.0 percent, 16.0 percent and 14.4
percent of net sales, respectively.

The share of royalties, related downpayments and maintenance
charges increased to almost half of net sales during the period,
accounting for 46.5 percent of consolidated net sales compared to
35.4 percent in the previous year. The license agreements’ share of
SSH’s net sales year-on-year fell from 64.6 percent to 53.5
percent.

The IPSec and PKI products accounted for about half of reported net
sales, the Secure Shell products accounting for about half as well.
Compared with the first half of 2001, the Secure Shell products
targeted at end-user companies showed a stronger sales performance.
In the long run, SSH expects solid growth for both product families
and will further invest in the development of both product
families.

In the report period, the company launched new products, such as
the SSH Certifier product family designed for electronic
certification and the end-user version of SSH Sentinel software
enabling secure remote connections. The company also received the
first reference customers for both products, with agreements made
in the US, Europe and Japan. SSH expects these products to
contribute to better sales prospects for the end of the year.

In August, SSH and Kolumbus Oy, which is a Group company of Elisa
Communications, together launched a new Kolumbus electronic
identification service and the Kolumbus Secure VPN service based on
the SSH Complete VPN product. These services enable Kolumbus, among
other things, to provide its customers with electronic
identification and secure connectivity services for networks.

RESEARCH AND DEVELOPMENT

R&D spending accounted for 40.5 percent of net sales (including
investments). R&D expenses have remained at the same level during
the whole year.

More than half of R&D spending was allocated to the development of
new products, such as SSH Sentinel, SSH Certifier and SSH Complete
VPN. The company will maintain its level of expenditure related to
product development as planned.

By the end of September, the company had three patents and 27
patents were pending.

HUMAN RESOURCES

The company’s payroll grew modestly in the third quarter of 2001.
The period-end number of employees totaled 186, showing a year-on-
year increase of 17.7 percent, or 28 employees. Compared to the
first half of the year, the payroll grew by 2.8 percent, or by five
employees.

ORGANIZATIONAL CHANGES

Tatu Ylönen, SSH’s founder and Board Chairman, was appointed SSH
Communications Security Corp’s President and CEO as of September
21, 2001. Ylönen will act as President and CEO until the company
finds a new person who measures up to the responsibilities in the
company’s next development phase and who has the required knowledge
of the target markets. Tomi Laamanen was appointed new Chairman of
the Board of Directors.

Changes have been made in the company’s management structure as SSH
enters a  new phase in its development to be a global leader in
developing network security solutions.

At the end of the third quarter, SSH’s organization was also
changed to better respond to market needs. The new product-family-
based organization is now divided into the Toolkit, Secure Shell
and Network Systems product lines. The Network Systems product line
incorporates the SSH Complete VPN, SSH Sentinel and SSH Certifier
products. Each product line has a well-defined total responsibility
for their operations from product development to marketing.

In addition, SSH consolidated its sales, marketing and customer
support organizations. Now each function has its respective
executive to whom the market-specific sales, marketing and customer
support organizations report. At the same time, SSH centralized its
Group administration to function on a global basis. These
organizational changes aimed to further clarify responsibilities
and accelerate the product-related decision-making process.

SSH SHARES AND SHAREHOLDING

IT companies’ share prices continued their sharp fall in the report
period. The reported trading volume of SSH Communications Security
Corp shares totaled 6,880,747 (valued at EUR 54,303,602.70), i.e.
24.9 percent of shares changed hands. The highest quotation for the
period was EUR 15.99 and the lowest was EUR 2.30. The weighted
average price during the report period amounted to EUR 7.89 and the
company’s share closed at EUR 3.19 on the final trading day for the
period (September 28, 2001). The third-quarter share trading volume
totaled 1,859,584 (valued at EUR 6,732,152.15) i.e., 6.7 percent of
shares changed hands. The highest third-quarter quotation reached
EUR 6.40 and the lowest EUR 2.30.

There were no material changes in the shareholding in SSH
Communications Security Corp in the first three quarters of the
year. Applied Computing Research Ltd (ACR) still holds 63 percent
of the company’s shares. The principal shareholders are presented
in more detail at the end of this interim report.

SHARE CAPITAL AND BOARD’S AUTHORIZATION

SSH’s Annual General Meeting of April 19, 2001 authorized the Board
to decide on increasing share capital through a rights issue and/or
granting option rights or issuing bonds with warrants or
convertible bonds to the extent that the resultant share capital
may exceed by a maximum of EUR 108,000.

The AGM approved SSH’s new stock-option scheme, enabling the
company to offer its personnel a maximum of one million stock
options. Each stock option entitles to the subscription for one SSH
Communications Security Corp share with a nominal value of 3 cents.
Depending on the type of warrant, the subscription period will
begin in several stages on May 1, 2002, May 2, 2003, May 1, 2004
and on May 1, 2005 and will end within two years from the beginning
of each subscription period. The share subscription price is the
weighted average of closing prices of SSH share quoted in
continuous trading on the Helsinki Exchanges from February 1, 2001
to April 12, 2001, or EUR 7.63. As a result of the share
subscriptions based on the option rights, the company’s share
capital may rise by a maximum of EUR 30,000.

At the end of the report period on September 30, 2001, SSH’s share
capital amounted to EUR 829,516.83, including a total of 27,650,561
shares.

OUTLOOK

This year economic development in the company’s main market areas
and the overall IT-market performance in particular have been
markedly weaker than in recent years. This has been clearly
reflected in datasecurity investments both in Europe and North
America, which are the company’s main markets. Long-term prospects
for SSH’s products are still favorable. SSH expects that many of
the customers who have postponed purchases will ultimately buy from
SSH. SSH’s new products are expected to give a boost to the Group’s
short-term market growth as well.

In October, SSH revised the prospects for 2001, considering that
uncertainties in the IT markets would continue both in the USA and
Europe, which would affect the company’s short-term net sales
figures. The Group estimates its 2001 net sales to range from EUR
20 to EUR 22 million. Profit for the financial year 2001 is
estimated to be negative.

 INCOME STATEMENT

                            1-9/2001    1-9/2000   1-12/2000
EUR million

Net sales                      15.0       10.3         15.6
Materials and supplies         -3.2       -1.2         -1.8
Gross margin                   11.8        9.1         13.9
Expenses
   R&D                         -6.1       -4.9         -6.7
   Sales & marketing           -7.3       -3.6         -6.5
   Administration              -3.3       -1.7         -2.6
Other income from
business operations            +0.5       +0.1         +0.3
Operating result               -4.4       -1.0         -1.7
Financial income and expenses   1.6        0.4          0.8

Profit before extraordinary items-2.8     -0.6         -0.9
Extraordinary items               0.0      0.0         -1.6
Profit before taxes              -2.8     -0.6         -2.5
Taxes *)                          0.0      0.0          0.0

Net profit for the period        -2.8     -0.6         -2.5

* Taxes are proportionate to the net profit for the period.



BALANCE SHEET        Sept. 30, 2001 Sept. 30, 2000 Dec. 31, 2000
EUR million

Fixed assets
  Intangible assets               1.1      0.6          0.7
  Tangible assets                 1.8      1.1          1.4
Inventories and current assets    2.9      1.7          2.1
  Inventories                     0.5      0.0          0.0
  Current assets
      Short-term receivables      7.6      5.8          6.1
      Cash and cash equivalents  46.2     28.6         51.1
Total assets                     57.2     36.1         59.3

Shareholders’ equity             51.4     31.9         54.3
Liabilities                       5.8      4.2          5.1

Total liabilities and
shareholders’ equity             57.2     36.1         59.3

FINANCIAL INDICATORS
                              1-9/2001    1-9/2000    1-12/2000

Return on investment, %                                   -2.4
Return on equity, %                                       -2.5
Interest-bearing net
liabilities, EUR million       -46.0        -27.6        -50.9
Equity-to-assets ratio, %       93.9        90.1          93.0
Net gearing, %                 -90.9        -87.5        -94.2
Gross capital expenditure,
EUR million                      0.6          1.9          2.4
% of net sales                   4.3         18.2         15.6
Investments, EUR million,        0.9          1.9          2.8
% of net sales                   5.7         18.2         18.4
R&D expenses, EUR million,       6.1          4.9          7.1
% of net sales                  40.5         47.1         45.2
Personnel, on average            182          112          130
Personnel, period-end            186          158          172


PER-SHARE DATA
                            1-9/2001    1-9/2000   1-12/2000

Earnings per share,
EUR (undiluted)               -0.10         -0.02     -0.04
Equity per share, EUR          1.85          1.22      1.96
Number of shares, period-end,
‘000                         27,650       25,913     27,578
Share performance, EUR
  Average price                7.89          0.00     15.84
  Lowest                       2.30          0.00     14.17
  Highest                     15.99          0.00     18.30
Share price, period-end        3.19          0.00     15.40
Market capitalization,
period-end, EUR million         88.2          0.00     424.7
Volume of shares traded,
million                         6.9          0.00       2.8
Volume of shares traded,
% of share capital             24.9          0.00     10.30
Value of shares traded,
EUR million                    54.3          0.00      44.7
Price-earnings ratio (P/E)                             -429


CONTINGENT LIABILITIES
                      Sept. 30, 2001 Sept.30, 2000 1—12/2000
EUR million
Assets pledged
 Rental liabilities     1.2            1.2           1.2
 Leasing liabilities    0.2            0.2           0.2


The social overhead expense on option rights exercisable in the
future would be EUR 91,410 calculated on the closing price of the
company’s share at EUR 3.19.

The figures in this interim report are unaudited.
SHAREHOLDERS

The company’s ten largest shareholders, excluding nominee-
registered shares, on September 30, 2001 were as follows:

Applied Computing Research (ACR) Ltd              63.6%
Mutual Pension Insurance Company Varma-Sampo       2.9%
Kaukonen Kalle                                     2.5%
Nixu Oy                                            1.9%
Mutual Pension Insurance Company Ilmarinen         1.7%
Promotion Capital I Ky                             1.7%
Mattila Samuli                                     1.0%
Markula Jussi                                      0.9%
Mutual Insurance Company Kaleva                    0.8%
Kivinen Tero                                       0.7%
Total                                             77.7%
Nominee-registered shares                          0.2%


FINANCIAL INFORMATION

A briefing on this interim report for analysts and the media will
be presented at the auditorium of SSH’s headquarters on the 1st
floor, Fredrikinkatu 42, Helsinki, on Wednesday, October 31, 2001
at 11:00 a.m. Entrance at the corner of Fredrikinkatu and
Malminkatu.

SSH Communications Security Corp will disclose its next interim
report and the results for January 1 - December 31, 2001 in
February 2002. Further information will be available on the
company’s www sites in due course.


Helsinki, October 31, 2001

SSH COMMUNICATIONS SECURITY CORP

Board of Directors



Distribution:
Helsinki Exchanges
Major media

© 2002 SSH Communications Security Corp. All rights reserved. ssh® is a registered trademark of SSH Communications Security Corp in the United States and in certain other jurisdictions. All other names and marks are property of their respective owners.