Secure Computing is in the running for the best tech stock for 2007. Click here to see the other entries.
If your goal is to make millions in tech, you've got to pay attention to where chief information officers (CIOs) are going to spend their money. For 2007, security products and services are near the top of the list.
Too many doors to lock
But that can't be surprising. How often has your PC gone blue over a virus in years past? Too many to count, I'm sure.
As bad as it is for your PC, it's even worse for networks. Every device, or "node," on the system can be compromised. And when one node is compromised, all may be compromised. Think of every iPod, PDA, printer, or PC on the network as vulnerable.
Why CIOs are terrified
But CIOs already know this. For example, paranoid executives at Equifax (NYSE: EFX ) have set aside roughly 23% of the firm's 2006 sales, or $350 million, for security services.
They're not alone. That's why researcher IDC says that the market for data security routinely grows by 20% annually, which, in turn, has given rise to tech titans like Check Point Software (Nasdaq: CHKP ) , Websense (Nasdaq: WBSN ) , and encryption specialist RSA, which EMC (NYSE: EMC ) acquired for $2.1 billion in June.
But 20% is peanuts. IDC says some sectors of the data security market could expand by 40% or better over the next several years.
Hasta la vista, spammy
My favorite among those sectors is unified threat management, or UTM. Quit laughing. I know that sounds like something straight out of the Terminator movies. Trust me when I tell you that it has nothing to do with Calee-FOH-nya's governator and everything to do with keeping networks secure.
Specifically, UTM refers to a device that combines hardware and software for swatting digital pests before they breach network nodes. Few are better at that than Secure Computing (Nasdaq: SCUR ) , which I made a pick for the October issue of David Gardner's Motley Fool Rule Breakers growth investing service.
A secure advantage
And I own shares today. Why? Take a sampling of what I wrote in the buy report:
"More important, however, is Secure Computing's July acquisition of CipherTrust for $274 million ... Combining the two entities allows Secure Computing to create an intelligent firewall that breaks new ground. Not only will it boast the sort of encryption that the Feds trust (government customers account for roughly 20% of revenue), but it also will be able to sniff out bad senders proactively."
Called Trusted Source, the technology features a global network of servers that scans the Web for miscreants. Then, when it finds them, it bars the digital doors like a bouncer at a Hollywood dance club. Spam? Sorry, pal, you're not on the list.
The best tech stock of 2007
You'd think the act of stiff-arming digital pests more comprehensively than most would have analysts salivating. But that's not the case with Secure Computing. Wall Street believes that this four-star stock in Motley Fool CAPS is capable of boosting the bottom line by only 14% annually over the next five years.
I think that's crazy. So does the management team, which projects $1 billion in revenue by the end of 2010. For perspective, consider that Secure Computing generated just $155.3 million in sales over the past 12 months.
But neither Trusted Source nor low expectations is what makes Secure Computing the best tech stock for 2007. What does? Management. CEO John McNulty purchased shares when the stock fell under $6 in July and there's been buying from other insiders since. Talk about bullish.
Get in the game
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Fool contributor Tim Beyers, ranked 400 out of more than 21,000 in CAPS, only breaks the rules in his portfolio. Wimp. Tim owns shares of Secure Computing. Get the skinny on all of Tim's stock holdings by checking his Fool profile. Websense used to be a Stock Advisor recommendation. The Motley Fool's disclosure policy is locked tighter than a bank vault.