At the InformationWeek 500 conference last week, McAfee
DeWalt has some interesting stats: Malware is 10 times more prevalent each year; there are 17,000 phishing attacks a month; and about a quarter of people in the U.S. have been victims of some type of identity theft.
More importantly, DeWalt has some nice projections for the overall security software market. He forecasts that the market will surge from $13 billion in 2006 to $31.4 billion in 2010.
So with all this activity, what are some interesting stock plays?
Actually, I'm a fan of McAfee. The company has a customer base of about 125 million, generates $100 million-plus in operating cash flow per quarter, and has more than 250 patents. With more than $1 billion in cash and cash equivalents in the bank, the company also has opportunities for acquisitions. This is critical in dealing with the emerging cyber security threats.
True, McAfee has had a dicey past, especially with its questionable accounting. But that's why the recent hiring of DeWalt is so important. He was a top executive at EMC
In fact, DeWalt is already getting traction with McAfee. In the second quarter, the company posted a 57% increase in earnings and snagged 11 deals in excess of $1 million, which was its best performance in five years.
Besides McAfee, I also like the prospects of Check Point Software
Check Point understands that security threats are expanding because of the growth in new platforms, such as social networking, mobile devices, virtualization, and even car and home appliances. (Cisco
To deal with such things, Check Point has nailed savvy acquisitions. There was the purchase of NFR, which allows for real-time protection of networks, and the deal for Protect Data, which provides security for mobile devices.
I also think there are some interesting smaller players in the security space. Take Sourcefire
Unfortunately, the company's performance has been uneven since its IPO early this year. But Sourcefire plans to launch a variety of products over the next couple of months, and this should help boost the top line.
Because of the volatility, I remain cautious on the stock. But I think investors should still keep tabs on it. Perhaps by next year, Sourcefire will get the business back on track.
All in all, things look pretty interesting for security software vendors. Basically, it's hard to imagine that cyber security threats will slow down. The sector looks like a good choice for investors who want to find growth.
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