Caught a virus? Invest in the cure
moneycentral.msn.com
As high-profile attacks like last week's Love bug spread like the common cold, high-tech
security companies like Symantec, Network Associates and VeriSign look like healthy
investments.
By Michael Parrish
In this minefield of a market, beset with Love bugs and inflation fears, are you doing reconnaissance on technology
companies that offer a measure of safety? Then consider fast-growing Internet-security software companies, many of
which are already seriously profitable.
Longtime industry leaders in the field include Symantec (SYMC, news, msgs) and Network Associates (NETA, news,
msgs), as well as VeriSign (VRSN, news, msgs) and Check Point Software Technologies (CHKP, news, msgs). But
we can name at least five other strong players worth researching: ODS Networks (ODSI, news, msgs), Rainbow
Technologies (RNBO, news, msgs), ISS Group (ISSX, news, msgs), Entrust Technologies (ENTU, news, msgs) and
RSA Security (RSAS, news, msgs).
What do these companies do besides come to the fore every time a virus sweeps the
world's computers? Secure your payments for stocks and socks online, for starters. But
software packages from these firms are also a bedrock need for businesses that must
verify partners and customers quickly and accurately; detect intruders and hackers; set up
firewalls; and set up business networks called virtual private networks (VPNs), that operate over the open Internet
instead of expensive dedicated communications lines.
For many businesses, the safe exchange of information is much more important than the secure transfer of cash. And as
they are realizing, the Internet increases both information exchange and a company's vulnerability. Companies want
confidence that only their employees and partners know the details of their special promotions, new marketing strategies
and other business secrets. Meanwhile, the security threat is growing dramatically.
High cost of hacking
A hacker in January posted on the Web 25,000 customers' personal credit-card numbers stolen from an online music
retailer that refused a $100,000 ransom demand. Russian hackers last year took control of the entire pipeline system of
OAO Gazprom, the world's biggest natural-gas producer and the largest supplier to Western Europe. Just last week, the
ILOVEYOU e-mail worm swept worldwide in just five hours, shutting down thousands of company e-mail systems.
Overall, in 1999, virus attacks alone cost information systems worldwide more than $12 billion in damages, according to
Computer Economics, a technology research firm based in Carlsbad, Calif. And despite the proliferation of increasingly
complex -- and increasingly malicious -- viruses over the past three years, "organizations are still just beginning to
implement adequate security plans," says Michael Erbschloe, Computer Economics' research vice president.
This is a big business opportunity, notes Martin Pyykkonen, senior Internet infrastructure analyst at CIBC World
Markets: "It's more than just you and I buying something on the Web, or a supplier in a supply chain making a
transaction. The market is much broader and deeper than a first glance gives you."
Another positive shift for the industry: More and more security purchase decisions are at the CIO -- chief Internet officer
-- level, rather than in the hands of network administrators. And these CIOs, looking at the big picture, are expanding their
budgets for security.
Three leaders in the field
Two security stalwarts are powerhouses in the field -- Symantec, the No. 1 antivirus-software vendor, and Network
Associates, the other big gun with a wide range of security software. Both have their attractions. Both stocks fell in the
spring tech slump, but not as far as others. And both were early choices for investors hunting through the rubble for solid
buys. Symantec, which produces the Norton line of antivirus and utilities software, has gained a solid 220% in stock price
over the past year to reach a $3.2 billion market capitalization, but still seems to be a decent value with a
price-to-earnings (P/E) multiple of 23.
Network Associates, with about the same size and value-oriented financial profile, sells its software through distributors
and also through the Web site of its publicly held subsidiary, McAfee.com (MCAF, news, msgs). The company
reorganized into four business units in January, including the new myCIO.com Web site aimed at businesses. It also had a
strong, 110% stock advance over the past year.
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