Where is $1, $2 etc coming from? Those are special variables that contain contents of regex captures, which you aren't generating here.

You also don't have a variable named $encrypted_data. Is this the code you're using? If not, please edit your post and include it.

Also, add use warnings; and use strict; right above your other use line.

I apologize for using dummy names for my variables: I do know better. Let me digress:

I need to use real data to construct the encryption key such that the key may consist of "$user|$server". I want to store the encrypted password in a file that can be accessed by an associated key made up of user etc. I need to construct the encryption key in a sensible way...i.e. not a hex number but real data. I am stumped figuring out how to do this.