McAfee blew past analysts' fourth quarter sales estimates last week and met Wall Street's profit forecast. The Santa Clara, Calif. firm also issued bullish first-quarter guidance and announced a $500 million stock repurchase program, paving the way for M&A activity. McAfee is one of TheStreet's top tech picks for 2009 and has been on a mission to claw share from arch-rival Symantec ( SYMC). So far, it seems to be working. "We increased market share in all four quarters
Though Hardly a household name, ArcSight is the rising star of I.T. security. ArcSight sells devices for monitoring security threats across networks and data centers and touts its neutrality as one of its key strengths, enabling the firm to work with a vary of tech heavyweights. These include EMC ( EMC), Juniper ( JNPR), IBM ( IBM) and Cisco ( CSCO). As one of TheStreet's breakout stocks, ArcSight posted revenue of $136.2 million in fiscal 2009, up from $101.5 million in 2008 and just $15.3 million in 2004. During its recent second-quarter results, the company also grew sales by almost 40% compared to the prior year's quarter. Last October ArcSight outlined plans to boost its operating margin during its first-ever analyst day and is expected to continue its growth trajectory in 2010. The Cupertino, Calif.-based company is looking to increase its international sales over the next few years, as well as tap into increased government spending on cyber security. ArcSight also expects a major revenue boost from U.S. government stimulus packages for smart energy grids and electronic medical records. With a market cap of just over $830 million, there has even been speculation that ArcSight would make an attractive acquisition for a tech bellwether such as Hewlett-Packard ( HPQ), although the company has reiterated its desire to remain independent. It has been suggested that ArcSight's strengths are already reflected in its stock. The company nonetheless has a P/E ratio of 67.33, far outstripping Symantec, McAfee and Check Point -- second only to Sourcefire on this list.
With strong links to the U.S. Government, security software maker Sourcefire is in a great position to ride the federal spending wave. Buoyed by its recent strong fourth quarter, the company is also expected to boost its enterprise business. "As we think about 2010, we continue to be very positive on the Sourcefire story as we expect the company to continue to experience solid growth from cybersecurity and accelerating growth in its commercial business," wrote Stifel Nicolaus analyst Weller. Sourcefire has already been an acquisition target for Barracuda Networks and Check Point, with the latter running into intense political opposition. Sourcefire's Snort intrusion detection technology is widely used in the U.S. intelligence community, prompting Washington lawmakers to cite national security concerns about a possible Sourcefire sale. The Columbia, Md., firm has nonetheless thrived as an independent entity. Shares of the software specialist climbed more than 250% during the last year, although it dipped slightly in the last few weeks. This could spell good news for investors, according to Weller. "The recent significant pullback in Sourcefire shares leads us to continue to be positive on the stock," he wrote, reiterating his buy rating for the company. "We believe that strong fourth-quarter 2009 results and another likely meaningful upward revision to Street estimates represent catalysts for the stock in the near term."
Check Point is a top mid-cap stock for 2010. The network security specialist recently posted record fourth-quarter results and the company has said that it is optimistic about this year. The Israeli firm, which bought Nokia's ( NOK) underperforming security appliance business in late 2008, counts all Fortune 100 companies among its customers, and its stock has risen more than 40% in the last 12 months. Despite this growth, at least one analyst urges investors to approach Check Point with caution. Stifel Nicolaus analyst Todd Weller recently downgraded the company from buy to hold, explaining that Check Point's valuation has returned to normal levels. Check Point is also up against some big-name competitors such as Cisco ( CISCO) and Juniper ( JNPR), not to mention newly-public Fortinet ( FTNT). There are nonetheless positives for Check Point in 2010, according to Stifel Nicolaus' Weller. "
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