Author Archives: Scalper1

Cisco Lobs Firewall Barbs To Whack Palo Alto, Check Point, Fortinet

Networking firm Cisco Systems ( CSCO ) was slated to mount a cybersecurity charge Tuesday, unveiling a next-generation firewall to squash  Palo Alto Networks ( PANW ), Check Point Software Technology ( CHKP ), Fortinet ( FTNT ) and Intel ( INTC )-owned McAfee. Protecting digital data is a $19 billion opportunity over the next 10 years, Dave Stuart, Cisco’s director of product marketing, told IBD. Cisco’s Firepower Next-Generation Firewall will capture some of those billions, he says. “We believe this level of integration is unprecedented in the environment,” Stuart says. “Competitors . . . miss that opportunity to correlate information to shrink that time-to-detection rapidly in the market.” Tech Giants Battle Pure Players In Security Stuart’s words are merely the latest barb lobbed against pure players in the  cybersecurity battle for market share . Broad-based tech giants IBM ( IBM ), Cisco, Dell and Microsoft ( MSFT ) have made hefty investments in recent years to carve out security sales, going up against each other and companies that focus solely on security wares. On Wednesday, Cisco posted fiscal Q2  results, saying its security sales for the quarter ended Jan. 23 rose 11% from the year-earlier quarter, to $462 million. Cisco’s overall revenue was flat. For the first half of fiscal 2016, Cisco’s $947 million in security sales rose 9%, to $947 million. Cisco’s half-year security revenue already eclipses the total 2015 sales for CyberArk Software ( CYBR ), Proofpoint ( PFPT ),  FireEye ( FEYE ) and Palo Alto Networks, and is nearing Fortinet, which reported $1.01 billion in 2015 sales. And security made up just 4% of Cisco’s $11.8 billion in total fiscal Q2 revenue. “We clearly have our efforts behind security,” Stuart said. “The opportunity is not lost on our adversaries either.” Industrywide, a breach is generally detected within 100 days, Stuart says. He says Cisco’s technology shrank that to 17.5 hours, down from 46 hours in the prior quarter. Firepower pulls intelligence from across that technology to detect a breach. Firepower Deletes ‘Human’ Element As Stuart describes it, upon a breach, the Firepower management center forces the “stranger-host” into a contained environment. The process is automated — it doesn’t require “back-end analysis with humans,” Stuart said. “We are providing the best of breed on the IPS (intrusion prevention system) side, advanced breach detection on the malware side and leading third-party platforms,” he said. “All that goes into a platform that is best of breed and doesn’t force that choice between products.” Last year, Cisco acquired security vendor OpenDNS for $635 million, adding to its $2.7 billion Sourcefire acquisition in 2013. Via OpenDNS, Firepower can detect malicious online activity and then “instruct the URL to batten down,” Stuart said. “That’s the integration we’ve built into the platform now,” he said. “It really does differentiate us.” Firepower’s code is a singular code. Adding third-party layers will require joint efforts among security teams to ensure that the new code is up to snuff, Stuart said, adding, “We’re not opening this up for anybody to write their code onto it.” Segmentation Advisory Launched In conjunction with the Firepower announcement, Cisco was set to unveil its Security Segmentation Service, an advisory service designed to examine a client’s data for weaknesses, and then create a customized security approach. But that doesn’t mean Cisco is necessarily peddling its segmentation solution, TrustSec, Stuart says. Cisco competes in the segmentation market against pure players like Fortinet and Symantec ( SYMC ). The advisory service is merely a design jumping point, Stuart said. “We start with a workshop,” he said. “After about 60 days we discern what their business and compliance issues are. That goes essentially into building a design for segmentation.” Stuart acknowledges that Cisco is a newer entrant to the cybersecurity market. Switching, routing and collaboration remain its largest chunks of revenue, bringing $3.48 billion, $1.85 billion and $1.02 billion, respectively, in total fiscal Q2 sales. Cisco long has been the No. 1 maker of networking gear. Rivals “have been in the next-generation firewall space for a while,” he said. “I might add, some of the vendors providing sand-boxing are trying to expand their portfolios into prevention and remediation. We’re way ahead on them in terms of those aspects.”

Time To Buy Cyber Security ETFs On Decent Q4 Results?

Though the cyber security industry has lost its momentum in the past several months, partially due to the weakness in the broad technology sector, it is poised for exponential growth in the coming years in the face of increasing cybercrime and the need to protect against these threats. According to Gartner, global security spending will increase 4.7% year over year to $75.4 billion in 2015 with some analysts projecting the global market to grow from $77 billion in 2015 to $170 billion by 2020 . The Q4 earnings reports of several industry players reflect this trend as most of them have beaten our earnings and revenue estimates with an encouraging outlook. Yet, they failed to drive the space and its ETFs higher that might suggest an attractive entry point at the current level. Let’s dig into the earnings results of some of the cyber security firms that have the largest allocation to the ETFs in this industry: Cyber Security Earnings in Focus CyberArk Software (NASDAQ: CYBR ) reported earnings per share of 30 cents and revenues of $51.5 million, outpacing the Zacks Consensus Estimate of 13 cents and $44 million, respectively. The company projects earnings per share in the range of 15-16 cents on revenues of $42.5-$43.5 million, up 29-32% year over year, for the ongoing first quarter. The lower-end of both the guidance was well above the Zacks Consensus Estimate of 12 cents for earnings and $42 billion for revenue. For 2016, revenues are expected to grow 27%-29% to $205-$207 million and earnings per share are projected in a band of 83-86 cents. The lower-end of both the full year guidance was also well above the Zacks Consensus Estimate of $203 million for revenue and 67 cents for earnings. However, analysts were expecting earnings per share of 17 cents and 91 cents for the ongoing quarter and fiscal year, respectively, which sent shares of CYBR tumbling following the earnings announcement on February 11 after the closing bell. The stock lost 10.8% on February 12. FireEye (NASDAQ: FEYE ) beat our earnings estimate but missed on revenues. Net loss per share came in at 73 cents, narrower than the Zacks Consensus Estimate of 76 cents loss but revenues of $185 million fell shy of our estimate of $187 million. FireEye expects revenues of $167-$177 million for the first quarter and $815-$845 million for the full year. The midpoint of the range was in line with the Zacks Consensus Estimate for the quarter and above our estimate of $824 million for the year at the time of earnings release. Net loss per share is projected in a range of 49-53 cents for the first quarter and $1.25-$1.32 for the full year. The midpoint of both projections was better than the Zacks Consensus Estimate of a loss of 81 cents and $3.00, respectively. Shares of FEYE fell 3.3% in the normal trading session following its earnings announcement on February 11 after the closing bell. Check Point Software Technologies (NASDAQ: CHKP ) topped our estimates on both the top and the bottom lines by $2 million and 6 cents, respectively. It expects earnings per share of 99 cents to $1.05 on revenues of $395-$410 million for Q1. The midpoint was well above our estimate of 93 cents for earnings but below our estimate of $403 million for revenues at the time of the earnings release. For the fiscal year, revenues and earnings are expected in the range of $1.72-$1.79 billion and $4.45-$4.60, respectively. The midpoints of both are well ahead of the Zacks Consensus Estimate of $1.75 billion and $4.08, respectively. The stock has risen nearly 4.6% since its earnings announcement on January 28 before the opening bell. Fortinet (NASDAQ: FTNT ) missed our earnings estimates by 6 cents but outpaced the same on the revenue front by $1 million. Fortinet sees revenues in the range of $270-275 million and earnings per share of 8-9 cents for the ongoing third quarter; the midpoints of both were lower than our estimates of $277 million and 9 cents, respectively, at the time of the earnings release. For 2016, the company expects revenues to grow more than 24% to $1.25-$1.26 billion and earnings per share to come in the range of 67-69 cents. The upper end of both the projections was above our estimate of $1.24 billion and 23 cents, respectively. The stock has plunged nearly 8.5% following the Q4 earnings announcement on January 28 after the closing bell. Last but not the least, Juniper Networks Inc. (NYSE: JNPR ) outpaced on both the bottom and the top lines by 3 cents and $0.22 billion, respectively. For the first quarter, the company expects earnings per share in the range of 42-46 cents and revenues in the range of $1.15-$1.19 billion. The Zacks Consensus at the time of earnings release was pegged at 37 cents for earnings and $1.201 billion for revenues. Shares of JNPR are down nearly 17.7% since its earnings announcement on January 27 after the closing bell. ETFs in Focus The string of earnings beat but rough stock performances have put this niche area of the technology sector in focus for the days ahead. Currently, there are a couple of cyber security ETFs that investors could stock up on beaten down prices: PureFunds ISE Cyber Security ETF (NYSEARCA: HACK ) The fund offers global exposure to those companies that ensure safety to computer hardware, software and networks, and fight against any sort of cyber malpractice. It tracks the ISE Cyber Security Index, holding 34 securities in its basket. It is well spread out across components, as each security holds less than 4.9% of total assets. From an industrial look, software and programming accounts for nearly 66% of the portfolio while communication equipment and IT consulting & data services round off the top three. In terms of country exposure, U.S. firms take the top spot at 68%, followed by Israel (12%), the Netherlands (6%), Japan (4%), United Kingdom (4%), South Korea (3%), Finland (2%), and Canada (1%). The fund has amassed $636.6 million in AUM and charges 75 bps in fees per year from investors. Volume is solid as it exchanges 495,000 shares in hand per day. HACK has lost 17% over the past one month. First Trust NASDAQ CEA Cybersecurity ETF (NASDAQ: CIBR ) This ETF has accumulated over $105 million in its asset base within eight months of its debut. It charges 60 bps in annual fees and trades in moderate average daily volume of more than 68,000 shares. The fund follows the Nasdaq CTA Cybersecurity Index, which measures the performance of companies engaged in the cyber security segment of the technology and industrials sectors. In total, the product holds 34 stocks in its basket with Cisco Systems (NASDAQ: CSCO ) taking the largest allocation of 7.14% share while other firms account for less than 5.7% of the assets. Further, it is skewed towards the software industry at 46.2%, while communications equipment rounds off the next spot with a double-digit allocation. Like HACK, American firms account for 69% of CIBR while the Netherlands, China, Israel and many others make up for a single-digit allocation. The ETF has shed 13.3% in the same period. Original Post

Telecom ETFs To Watch After Lukewarm Earnings

This year has been rather mediocre for the telecom industry, with lukewarm results coming up amid turbulent economic conditions. The industry has emerged as an intensely contested space, where success depends largely on technical superiority, quality of services and scalability. Cut-throat pricing competition has put pressure on margins this earnings season. However, mixed results and global market concerns notwithstanding, the overall sentiment for the U.S. telecommunications industry in 2016 is positive. Telecommunications is one of the few industries to have managed to undergo rapid technological improvement even during depression. In this era of digitization and technology, the ever-growing demand for technologically superior products should see the sector through. Quite expectedly, investors will keep an eye on telecom earnings for the rest of this season to assess industry dynamics and future growth prospects, with several big names like T-Mobile US, Inc. (NASDAQ: TMUS ), Dish Network Corp. (NASDAQ: DISH ) and Cincinnati Bell Inc. (NYSE: CBB ) yet to report. Telecom Earnings in Details U.S. telecom behemoth Verizon Communications Inc. (NYSE: VZ ) reported impressive results, beating on both the top and the bottom line. Adjusted earnings per share of 89 cents beat the Zacks Consensus Estimate by a penny and year-ago earnings of 71 cents. Quarterly total revenue increased 3.2% year over year to $34,254 million, outpacing the Zacks Consensus Estimate of $34,132 million. Apart from earnings, the company was also in the news because of other developments. According to a recent Bloomberg report , Verizon has assigned its chief executive officer of its AOL unit, Tim Armstrong, a key role, exploring options to bid for the core assets of tech giant Yahoo Inc. (NASDAQ: YHOO ). However, neither company has confirmed the news as yet. Verizon has gained 11.2% since reporting earnings (as of February 11, 2016). In contrast U.S. telecom giant AT&T Inc. (NYSE: T ) reported weak financial results, wherein both the top and bottom line lagged the Zacks Consensus Estimate. AT&T’s adjusted earnings per share moved up 14.5% year over year to 63 cents, missing the Zacks Consensus Estimate by a penny. Quarterly revenue increased 22.3% year over year to $42,119 million, but missed the Zacks Consensus Estimate of $42,781 million. AT&T’s weaker-than-expected earnings were primarily attributable to disappointing postpaid wireless subscriber addition of 526,000, down a significant 38.4% year over year. The stock has gained 2.3% since reporting earnings (as of February 11, 2016). CenturyLink Inc. ‘s (NYSE: CTL ) solid quarterly performance was buoyed by increased revenues from the acceptance and recognition of Connect America Fund (CAF) phase II funds, along with strength in high-bandwidth data services and consumer strategic revenues. The telecom company’s fourth-quarter 2015 adjusted earnings per share of 80 cents surpassed the Zacks Consensus Estimate of 65 cents and were up 33.3% year over year. Quarterly total revenue of $4,476 million rose 0.9% from the prior-year quarter and surpassed the Zacks Consensus Estimate of $4,427 million. The stock climbed 11% since reporting earnings (as of February 11, 2016). ETFs in Focus Thanks to mixed results, telecom ETFs with considerable exposure to the three stocks above were all in the red in the last 10 trading sessions (as of February 11, 2016). Below, we discuss four of these that are in focus in the coming days (see all Telecommunication ETFs here ). iShares U.S. Telecommunications ETF (NYSEARCA: IYZ ) IYZ tracks investment results before fees and expenses corresponding to the price and yield performance of the Dow Jones US Select Telecommunications Index. The fund manages assets worth nearly $416.6 million and has an average trading volume of roughly 438,000 shares a day. It charges an expense ratio of 43 basis points a year. IYZ holds 25 stocks and has a concentrated approach in the top 10 holdings, with almost 63% of the asset base invested in them. Among individual holdings, top stocks in the ETF include AT&T, Verizon and CenturyLink, with asset allocation of 13.3%, 13.1% and 6.03%, respectively. The four major sectors of this ETF include Integrated Telecom, Wireless Telecom, Alternative Carriers and Communications Equipment, with asset holdings of 56.1%, 23.3%, 18.1% and 2.5%, respectively. The product lost 2.1% in the past 10 days and currently has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook. Fidelity MSCI Telecommunications Services Index ETF (NYSEARCA: FCOM ) This ETF tracks investment results before fees and expenses corresponding to the performance of the MSCI USA IMI Telecommunication Services 25/50 Index. The fund manages assets worth nearly $89 million and has an average trading volume of roughly 56,000 shares a day. It charges an expense ratio of 12 basis points a year. FCOM holds 33 stocks and has a concentrated approach in the top 10 holdings, with 73.5% of the asset base invested in them. Among individual holdings, AT&T, Verizon and CenturyLink number among the top five, with asset allocation of 25.8%, 25.4% and 4.1%, respectively. Diversified Telecommunication Services and Wireless Telecommunication Services are the two major sectors of this ETF, with asset holdings of 88.2% and 11.8%, respectively. The product lost 0.5% in the past 10 days and currently has a Zacks ETF Rank #3 with a Medium risk outlook. iShares Global Telecom ETF (NYSEARCA: IXP ) This ETF tracks investment results before fees and expenses corresponding to the price and yield performance of the S&P Global 1200 Telecommunications Sector Index. The fund has nearly $356.7 million of assets under management and an average trading volume of roughly 41,000 shares a day. The fund charges an expense ratio of 47 basis points a year. IXP holds 31 stocks in its portfolio and has a concentrated approach in the top 10 holdings, with approximately 74% of the asset base invested in them. Among individual holdings, top stocks in the ETF include AT&T and Verizon, with asset allocation of 18.9% and 17.3%, respectively. Integrated Telecommunication Services, Wireless Telecommunication Services and Alternative Carriers are the three major sectors, with asset holdings of 77.5%, 21.2% and 1.2% respectively. It fell almost 0.6% in the last 10 days and currently has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook. Vanguard Telecom Services ETF (NYSEARCA: VOX ) This ETF seeks to track the performance corresponding to the benchmark MSCI US Investable Market Telecommunication Services 25/50 Index. It has assets under management of nearly $1 billion and an average trading volume of roughly 96,000 shares a day. The fund charges an expense ratio of 10 basis points a year. VOX holds 31 stocks in its portfolio and has a concentrated approach in the top 10 holdings, with 71.1% of the asset base invested in them. Among individual holdings, top stocks in the ETF are AT&T and Verizon, with a combined share of almost 50%. Integrated Telecommunication Services, Alternative Carriers and Wireless Telecommunication Services are the three major sectors, with asset holdings of 63.1%, 20.8% and 16.1%, respectively. The fund lost 0.7% in the last 10 days and currently has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook. Original Post