Just popped in here because of another thread. I'm neither long or short on Checkpoint but I am in the business technically. I follow the sector for competitive reasons, not investment reasons. Here are some generalizations of the market that I believe are mostly true.
What I've seen in the industry is that there are signs that the firewall market is partially saturated; it is becoming more price driven than quality driven and the sector has been consolidation, i.e., different security companies, firewall, intrusion detection, VPNs, etc. are merging. See Axent, Network Associates, and Security Dynamics.
Initial triple digit growth projections in the sector have been reduced to 25% growth rates. Firewalls are being replaced rather than new ones added.
I think the market has turned to looking at who has been consolidating well and has earnings. Checkpoint is doing well in the later but not the former. Network Associates is doing well in consolidating and the only one of the aforementioned that has positive earnings.
Investing Opinion: Normally one would invest in the business you know, but this one has so many peculiarities I've personally chosen to avoid it. If I were to invest, I'd either try to pick out of the companies that are consolidating or try to find a company that was a likely acquisition target. The sequence of money makers in the sector was first anti-virus, then firewalls, and then authentication tokens. They next hot one will likely come from the set biometric authentication, VPNs or intrusion detection. The industry consensus is VPNs are next, but for a number of reasons I think intrusion detection is next. IMO biometrics is too "techi" for near term acceptance; the customer base is doesn't believe anyone would intercept the traffic or I have specific application security such as shttp (which is free) so why bother having a VPN? On the other hand, there is an acceptance that no security product is free, so If I can watch, detect and respond to the inevitable attack, I'm OK.
Best Regards,
Jim |
