This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Cyber Security Providers Prepare For New Wars

Stocks in this article: FEYE TGT YHOO IBM CSCO AAPL GOOG FB MSFT

NEW YORK (The Deal) -- The New Year has been auspicious for cyber security companies.

FireEye's (FEYE - Get Report) agreement to pay nearly $1 billion for Mandiant in early January suggests that M&A activity will remain high in 2014. Companies such as KEYW Holding (KEYW), Palo Alto Networks (PANW), Imperva (IMPV), Proofpoint (PFPT) and Qualys  (QLYS) have made double-digit percentage gains in share price since FireEye announced the purchase.

Meanwhile, the recent high-profile hacks of Target's (TGT - Get Report) and Neiman Marcus' customer information, and of Yahoo!'s (YHOO - Get Report) banner ads, underscore the capabilities of cybercriminals and the value of systems that can deter, detect and track data thieves.

"There is much need to innovate because the bad guys continue to innovate," said Imperva CEO Shlomo Kramer, who is a serial investor in the security industry. Kramer backed Trusteer, a malware and fraud protection software company that IBM  (IBM) acquired last year. He holds stakes in companies such as WatchDox, Incapsula, Lacoon Security, TopSpin Security and SkyFence Networks and is a former investor in Palo Alto Networks, Sumo Logic and Check Point Software Technologies.

"Today the bad guys are the nation-states and organized criminals that are extremely sophisticated. There is a need to continue to innovate," Kramer said. "This makes information security a very dynamic environment with more segmentation and more acquisitions and more activity than other similar IT markets."

The pace of recent M&A has been steady. Following FireEye's purchase of Mandiant, Palo Alto Networks acquired Morta Security to improve its defenses against advanced persistent threats and campaigns intended to infiltrate a company's network in order to steal data.

Last summer, Cisco Systems (CSCO) bought network security SourceFire for $2.7 billion, a 30% premium to the closing price, paying nearly 10 times revenue.

IBM purchased Trusteer, which protects Web applications, computers and mobile devices, for a reported price of $700 million to $1 billion.

In short, more data stored in more places traveling to more devices will continue to draw more miscreants trying to steal it. The rapid development cycle of cyber attacks places a premium upon technology that defends against these new forms of incursions. The demand from businesses seeking that protection makes the price worth paying.

1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,164.95 -251.90 -1.45%
S&P 500 1,994.99 -26.26 -1.30%
NASDAQ 4,635.24 -48.1670 -1.03%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs