An estimated 84% of American workers use a mobile device, but just 22% of employers have a mobile security program in place. Some investors see the gap in those numbers as an opportunity for cyber-security companies like Check Point Software(CHKP), SourceFire (FIRE), Websense (WBSN), Imperva (IMPV) and Fortinet(FTNT).
Within the last month, Citigroup and Turner Investments have both recommended stocks in this group. Turner says “the market for cyber security is so promising and lucrative that it should enable select security companies to generate double-digit earnings growth annually over the next two years.” Citigroup says network equipment giants Cisco and Juniper offer services to increase network security, but are less focused on security than some of the niche players.
The intersection of two trends is driving the boom in cyber-security demand. Hackers are getting more sophisticated, and networks are becoming harder to monitor due to increased reliance on mobile devices and cloud computing. User names and passwords are now commodities that can be sold to the highest bidder on the black market, and hackers are also trolling for business plans, legal documents, and of course software.
Meanwhile many corporate networks can no longer be protected by firewalls, because so much of the network resides offsite in the cloud. And corporate IT managers have little to no control over what employees load onto the personal mobile devices that they are also using for work.
Software companies that help companies manage these issues are poised for strong growth, and could be attractive takeover targets for larger network network equipment companies. Citigroup analyst Walter Pritchard initiated coverage of SourceFire (FIRE) this month with a buy rating, saying that in addition to good fundamentals the company has “upside as a take-out target.”
