The hit to Check Point's stock price mirrors events in January,
when Morgan Stanley Dean Witter downgraded the stock
because Microsoft and Cisco Systems might enter the
security market.
More broadly, however, the stock market gyrations reflect
worries about Internet security companies as other, bigger
rivals enter the security niche. Already a wave of acquisitions
is sweeping the industry.
"You're seeing a roll-up of the industry--the name of the
game is consolidation," said Nicole Schmidt, analyst with
CIBC Oppenheimer. "It's not because their growth is slowing
but because a lot of them are single product companies that
don't have enough time to create critical mass. They have to
worry about competition springing up soon--in a race to
create critical mass or get bought out, there's a window of
opportunity of 18 to 24 months."
For its part, Check Point is trying to grow outside the security
space, earlier this month buying Internet address firm
MetaInfo. Rather than expanding into other parts of the
security market, Check Point has designs on networking, the
company has said.
Microsoft does not currently have firewall software, but its
proxy server software has some attributes of firewalls, which
are used to protect computer network from outside intruders
from the Internet. But Ballmer indicated, as investors and
security experts have believed for some time, that Microsoft
will add firewall features to the proxy software and perhaps
build it into the 5.0 version of its Windows NT operating
system.
[CHKPF offers Firewall-1, SecuRemote on a wide variety of platforms inlcuding UNIX, NT, others. MSFT proxy server is nowhere near Firewall-1. With MSFT keeps delaying NT 5.0 till mid-99 and chances are even NT 5.0's security will fall short that of Firewall-1, we talk about CHKPF having a relatively safe 98 earnings. This scare resembles that in late 1/98. The stock should rebound to $40's as it did in Feb and March 98] |
