CheckPoint awarded DOD IT security contract

Published 25 July 2007

A year-and-a-half ago CehckPoint withdrew its application to acquire Sourcefire in the face of sure CFIUS denial; nor the Pentagonm selects CheckPoint to protect sensitive military information

Timing is everything. A year and a half ago Israeli IT security company CheckPoint (Nasdaq: CHKP) was planning to acquire Columbia, Maryland-based Sourcefire for about $225 million. Trouble was, Checkpoint’s application was being considered by CFIUS (Commitee on Foreign Investment in the United States) precisely at the time a firestorm broke over CFIUS’s approval of the purchase by a Dubai-based company of management operations in major U.S. sea ports. Critics in Congress charged that the administration was more interested in trade and less interested in security. Against that backdrop, CFIUS members representing the intelligence communicy and the Department of Defense strenuously objected to the approaval of the sale of Sourcefire, arguing tha the Maryland comoany was doing too much secret work for the U.S. government to allow it to be owed by a foreign company. We predicted at the time that the approavl would not be given, and we were right: Realizing that CFIUS would not approave the sale, CheckPoint withdrew its application.

What a difference a year and a half make. The U.S. government has just selected CheckPoint for DoD Enterprise Software Initiative (ESI) and GSA SmartBUY Data At Rest (DAR) Blanket Purchase Agreement (BPA). The BPA enables federal, state, and local agencies to protect desktops, laptops, smartphones and removable media with solutions fromto provide protection for sensitive military information. Check Point data security products which were approved come from Redwood City, California-based Pointsec, a company CheckPoint acquiredearlier in the year. The solutions include Pointsec PC, Pointsec Media Encryption, and Pointsec Mobile. McLean, Virginia-based Immix Group was also part of the deal. The government-wide computer security contract award to immixGroup and Check Point is the result of the GSA-DoD partnership to carry out OMB and DoD policy directives (OMB-M-06-16; DoD Policy Memorandum, 3 July 2007). These directives instruct agencies to adopt measures and select data-at-rest (DAR) encryption products to protect personally identifiable information stored on laptop computers, desktop computers, tablet PCs, smart phones, personal digital assistants, and removable storage devices.

Michael: the text below should be in a blue box

CheckPoint had good news not only on the contracts front, but also on the revenue front. The company yesterday released its second quarter 2007 numbers, and they show revenue rising 27 percent over the secind quarter 2006, to $176.2 million. The numbers beat analysts’ predictions. Net profit on a GAAP basis was $69.5 million, up 6 percent on the corresponding quarter, and non-GAAP profit was $85.7 million, up 13 percent.

Globes reports that Earnings per share (EPS) on a GAAP basis were $0.31 for the second quarter, while non-GAAP EPS were $0.38, up 20 percent on the corresponding quarter. The analysts’ consensus was non-GAAP EPS of $0.36 on $172 million revenue. The second quarter GAAP EPS included $0.03 in charges that were not included in the corresponding quarter for equity based compensation expenses and net acquisition related charges, in connection with the acquisitions of Stickholm, Sweden-based Protect Data and Rockville, Maryland-based NFR Security. CheckPoint’s cash flow from current operations was $81.5 million for the second quarter, $7.1 million less than for the corresponding quarter. On the other hand, deferred revenue totaled $236.2 million, an increase of $59.7 million, or 34 percent, over deferred revenues at the end of June 2006.

Check Point chairman and CEO Gil Shwed said, “During the second quarter of 2007, we continued to generate strong financial results which exceeded our projections. These results were driven by growth in our core enterprise network security business complemented by our data security business.”