Wall Street warning up to cybersecurity stocks
The Google-China tiff – coming on the heels of more and more revelations about China’s sustained, sophisticated cyberattacks against Western government organizations, private companies, and critical infrastructure assets – has benefited cybersecurity companies; worldwide spending on tech security rose 6 percent to $26 billion in 2009, and is expected to grow 9 percent to $28.3 billion this year; this contrasts with information-technology spending as a whole, which declined 4.5 percent in 2009 and may rise 3 percent, to $1.5 trillion, in 2010; private cybersecurity firms with strong balance sheets and good growth prospects that might be viewed as viable candidates to float an initial public stock offering include Sophos, Barracuda Networks, Qualys, Proofpoint, and Tripwire
Tech-security companies are poised to become Wall Street darlings this year, thanks in part to Google’s tiff with China. Last month, the search giant threatened to pull out of China because of censorship and a distinctive cyberespionage attack on itself and some two dozen other technology, financial, and media companies.
USA Today’s Byron Acohido quotes Daniel Ives, analyst at FBR Capital Markets, to say that the Google-China affair has reinforced an already positive outlook for 2010 stock price performance of major security vendors, such as McAfee, Symantec (SYMC), and Check Point (CHKP) “Security has been underinvested,” Ives says. “Given the constant attacks, corporations and governments can’t continue to delay these high-priority purchases.”
It is not a sure thing. UBS analyst Brent Thill says companies could decide to accelerate spending on long-deferred business-application upgrades instead of security.
Google’s (GOOG) 12 January disclosure of details of a sophisticated cyberbreak-in aimed at specific companies was a watershed event, however. Since then, security firm McAfee (MFE) has signed sixteen deals with federal agencies to begin pilot tests of technology to deflect such attacks. “We’ve seen complex attacks like this before, but Google being involved brings a lot more awareness,” says Mike Carpenter, McAfee’s senior vice president, public sector.
Companies and governments already had been paying closer heed. Worldwide spending on tech security rose 6 percent to $26 billion in 2009, and is expected to grow 9 percent to $28.3 billion this year, says market researcher IDC. That contrasts with information-technology spending as a whole, which declined 4.5 percent in 2009 and may rise 3 percent, to $1.5 trillion, in 2010, IDC says.
Acohido writes that security firms have already benefited. McAfee shares closed Wednesday at $38.18, up 23.8 percent from its 3 February 2009, closing price. Over the same 12-month span, Symantec’s shares have risen 13.5 percent to $17.26 and Check Point’s 40.9 percent to $32.61.
Meanwhile, the rising incidence — and visibility — of cyberattacks also is boosting prospects for privately held tech-security firms, says Asheem Chandna, a partner at Greylock Partners, a leading Silicon Valley venture capital firm.
Private firms with strong balance sheets and good growth prospects that might be viewed as viable candidates to float an initial public stock offering include Sophos, Barracuda Networks, Qualys, Proofpoint, and Tripwire, Chandna says. He estimates 30 to 50 tech firms could go public this year, including three to five tech-security companies.
