HP (HPQ 1.55%) recently acquired cybersecurity start-up Bromium, which shields network endpoints from browser-based attacks, compromised downloads, and infected emails and apps by trapping malware in virtual "containers." HP already licenses Bromium's technology in its Sure Click security service, which is pre-installed or available for download for its enterprise-facing HP Pro and Elite PCs.
Sure Click creates virtual machines, which are isolated from the operating system and other apps, with every click in supported apps (like Word, Excel, PowerPoint, and web browsers), which tricks malware into "believing" that it's running normally on a user's PC. This makes it easier to isolate and eliminate the target before it infects other applications.
Image source: Getty Images.
Sure Click works together with HP's other security features like Sure Start, which is integrated into the BIOS; Sure Run, which is directly baked into a PC's hardware; and Sure Sense, a new AI-powered malware detection platform. The brand also includes HP's Sure View displays, which makes it difficult for onlookers to see a user's screen.
HP didn't disclose the financial terms of the deal, but buying Bromium should bolster the security of HP's devices and boost the brand's appeal with enterprise customers.
Why HP cares about enterprise software
HP's interest in the enterprise security market might surprise some investors, since the company parted with Hewlett Packard Enterprise (HPE 0.59%) -- its enterprise server, storage, and software counterpart -- four years ago.
However, HP still serves the enterprise market with its personal systems (PCs and workstations) unit, which generated two-thirds of its revenue last quarter. The rest came from its printers and printing supplies. Here's how those two businesses fared over the past year:
|
YOY revenue growth |
Q3 2018 |
Q4 2018 |
Q1 2019 |
Q2 2019 |
Q3 2019 |
|---|---|---|---|---|---|
|
Personal Systems |
12% |
11% |
2% |
2% |
3% |
|
Printers |
11% |
9% |
0% |
(2%) |
(5%) |
|
Total |
12% |
10% |
1% |
0% |
0% |
YOY = Year-over-year. Source: HP quarterly reports.
Within HP's personal systems business, its commercial revenue rose 10% annually last quarter, thanks to robust demand for new enterprise PCs with tighter security features and longer-lasting batteries. But its consumer revenue fell 11% due to longer upgrade cycles, competition from mobile devices, and Intel's ongoing CPU shortage.
Why HP cares about cybersecurity
This trend of stronger sales of enterprise PCs offsetting softer sales of consumer PCs has been the norm over the past three quarters. During the first quarter, HP stated that its Sure View displays were gaining ground with companies, since over 70% of U.S. workplaces used "open concept" designs which made it too easy to see other screens.
Image source: Getty Images.
In the second quarter, HP CEO Dion Weisler attributed the commercial unit's growth to "robust security" features, like Sure Sense, which were pre-installed in high-end devices like the Elitebook 800.
In the third quarter, HP added Sure Sense to its newest EliteBooks and ZBooks, and Weisler emphasized that HP continued "to expand" its "security leadership position" across all of its segments. It also noted that its latest Envy laptops come with Sure View screens and automated kill switches for webcams that aren't in use.
Simply put, HP realizes that enterprise customers demand more secure PCs, and it's dedicated to beefing up its security features to widen its moat against rivals like Lenovo and Dell. Five billion records were exposed in data breaches last year, according to Risk Based Security, and 4.1 billion records were exposed in just the first half of 2019. Disclosing a data breach can tarnish a company's reputation, and the strong demand for HP's commercial PCs indicates that companies are taking security risks much more seriously.
What does this mean for HP's investors?
HP's takeover of Bromium probably won't boost its PC revenue significantly. However, it should strengthen HP's "Sure" ecosystem of products and services, serve as the foundation for new security features, and ensure that it remains one of the top vendors of security-oriented enterprise desktops and laptops.
That could boost its sales of commercial PCs and offset the sluggish growth of its consumer PCs, which would offset the weak sales of its printers and printing supplies. Simply put, it makes sense for HP to invest in the growth of its strongest business as its other businesses lose their momentum.
