SECURITY US GOVT MAIN FOCUS IN COMING MONTHS
NEW YORK (Dow Jones)--Information-technology spending by the federal
government is about to get a big boost, and security-software companies will be
major beneficiaries.
It may take until early next year before significant sums reach companies'
revenue lines. But a look at federal technology priorities, and the central
role of security in them, provides solid long-term investment themes for
embattled technology investors.
"Federal demand is in the process of picking up dramatically at a time when
private demand is very weak," says James P. Lucier, senior Washington analyst
for Prudential Securities. Because government agencies are typically several
years behind in technology adoption, an "echo of the Internet boom" is on the
way.
The Bush administration has proposed a 56% increase in spending on
IT-security technology in fiscal 2003 to $4.2 billion from $2.7 billion in
fiscal 2002. That's a sizable sum for an industry with annual U.S. revenue of
$12 billion to $15 billion, according to Lucier. And it's just part of a
proposed increase in total federal IT spending to $52 billion next year from
$44.9 billion this year, not including a potential $1.5 billion increase if a
2002 emergency wartime spending measure now in the Senate passes. The numbers
don't include classified IT appropriations for intelligence agencies, which are
estimated to total another $20 billion in fiscal 2003, which starts Oct. 1.
The funds are "probably the single largest incremental opportunity in the
whole world of information technology," and one that will benefit many
companies, said Alfred T. Mockett, chief executive of American Management
Systems Inc. (AMSY), an IT consulting and services firm that gets 60% of its
business from government buyers.
Among the companies that stand to benefit from data protection product
purchases areRSA Security Inc( .RSAS) VeriSign Inc. (VRSN), and Entrust Inc
(ENTU)
"Security is my No. 1 focus for next year," said Mayi Canales, acting chief
information officer for the Treasury Department, speaking at a Prudential
Securities investor conference on May 22. Canales is also e-government
coordinator for the CIO Council, which brings agency CIOs together to
coordinate technology policy under the umbrella of the White House's Office of
Management and Budget.
Dan Mehan, CIO of the Federal Aviation Administration, also speaking at the
conference, said security is now so important that all bids for his agency's
technology contracts should start with explanations of a company's security
offerings. |
