Pulse: Security Software Feeling Insecure as IT Spending Dips

The ripple effect of plunging information-technology budgets washed over the security software today. Concerns over slower IT spending have cycled through a number of sectors in recent weeks, amplifying the news of weak earnings reports.

Last week, many of the Internet caching and infrastructure companies were hit with downgrades and earnings revisions over slowing IT budgets -- compounded by after a fourth-quarter earnings warning from Inktomi(INKT).

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Today, those concerns got transferred to the software producers who work at making online commerce secure.

Internet Security Software (ISSX) sank 20.1% after it was downgraded to market perform from buy by Robinson Humphrey, and UBS Warburg lowered its target price for the stock.

Internet Security closed down $13.19, or 20.1%, to $48.50

Fellow security stock Check Point Software (CHKP) also was downgraded by Robin-Humphrey, and fell 4.9%. In a note that took down target prices for most of the security-software stocks it covered, UBS Warburg left Check Point's target price intact.

UBS Warburg lowered its price target for security-software firm VeriSign (VRSN), and the stock closed down $2.13, or 3.1%, to $66.69.

Analyst Chris Hovis said industry checks showed that the "slowdown in IT spending may be more likely to translate into a slowing market for Internet security solutions than previously anticipated."

Check Point has been a big winner in the sector over the past year, gaining 137% in value in a year. Many of the other security-software stocks have done relatively well at holding value -- at least in comparison to other technology stocks.

Until its drop today, Internet Security Software had been 9.3% up over its closing price of a year ago. VeriSign, however, has dropped 61.3% over its closing price of one year ago. Many of the stocks have slid steeply in the past three weeks, as worries over a slowing IT budget began spreading over a number of tech sectors.

Check Point lost 16.6% since mid-December, while Internet Security dropped 25.8% and VeriSign lost 26.5% during the same period.

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