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IBM Cements Security Standing With Redoubled Check Point Alliance

Tech giant IBM ( IBM ) is solidifying its cybersecurity standing by deepening ties to No. 1 pure player Check Point Software Technology ( CHKP ) to pool research and integrate systems, the companies were scheduled to announce Thursday. It’s the most recent in a series of IBM moves to publicly step-up its cybersecurity initiatives. In 2015, IBM drew in $2 billion in cybersecurity sales , just 2.4% of total revenue. But that dollar mark easily topped total sales for Palo Alto Networks ( PANW ), Proofpoint ( PFPT ), Fortinet ( FTNT ) and FireEye ( FEYE ), and 12% year-over-year growth outstripped that of Symantec ( SYMC ) and Check Point. By combining forces, IBM and Check Point aim to thwart what the United Nations estimates is the $445 billion cybercrime underworld. Check Point’s and IBM Security’s researchers will be free to cross company borders to discuss threat data. And several Check Point applications will be folded into IBM technology, Check Point’s vice president of security services, Avi Rembaum, told IBD. The alliance redoubles an 18-year relationship between IBM and Check Point. IBM manages security offerings for clients across the globe, and those implementations sometimes include Check Point products. The two companies have partnered in that regard for the past 18 years. Thus, IBM is keenly apprised of Check Point’s software. Under the new accord, Check Point will further school IBM on its tech. “Tightening the relationship means we’ll be giving IBM very deep guidance around exactly what fields they should be looking for and how systems integrate,” Rembaum said. The new alliance centers on four main keys. Check Point and IBM will combine research forces to create “a gigantic pool of security researchers,” Rembaum said. Doing so will expand the potential threat intelligence-gathering net, but also lend credibility to potential discoveries. “When we conduct research, it’s nice to have another leading organization with which we can provide notes,” he said. “It’s helpful to have a pool of researchers to validate assumptions. . . . When two sources say it’s true, it makes it more relevant and more critical.” But what’s more compelling is the integrated threat-prevention and analytics technologies, Rembaum says. Check Point will fold its SmartConsole application into the IBM Security App Exchange for integration with IBM’s Security QRadar Intelligence Platform. Together, the systems can tackle the entire security gamut — analyzing, blocking and mitigating attacks. The integration also means that a customer can operate within an IBM space but still access Check Point functions, Rembaum said. IBM customers will also be allowed to manage Check Point Mobile Threat Prevention within IBM’s MaaS360 enterprise-mobility management system, a software used to remove malicious apps and do quick security rollouts. Mobile is “the most critical space” for customers to protect, he said. “(Smartphones) are an always-on and always-connected vehicle for employees,” he said. “And they operate outside the corporate security perimeter.” The expanded alliance also allows IBM to manage Check Point’s entire suite of products for clients, Rembaum said. Check Point will expand the number of tools IBM supports. “So IBM can be there in lockstep with us when we offer services,” he said.

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.”

CyberArk CEO On Earnings Guidance: ‘We Don’t Call It A Miss’

Headline breaches drove 2015 cybersecurity spending, but the several-months-long lull in hacks won’t slug CyberArk Software ( CYBR ), company CEO Udi Mokady told IBD Friday, as shares sank after the company gave disappointing Q1 and 2016 earnings guidance late Thursday. CyberArk stock pitched to a 16-month low, toppling as much as 14% Friday. Shares were down 11%, near 32.50, in afternoon trading on the stock market today . Shares of fellow security vendor FireEye ( FEYE ), which also gave disappointing guidance, were down 5% Friday afternoon, touching an all-time low. But unlike Tableau Software ‘s ( DATA ) grim 2016 outlook last week, CyberArk’s and FireEye’s guidance misses didn’t spiral into a widespread security deluge. IBD’s 25-company Computer Software-Security was down a small fraction Friday afternoon. The group had soared 29% in the first seven months of 2015 on the heels of the Ashley Maddison, Anthem ( ANTM ) and U.S. Office of Personnel Management breaches. Thereafter, lacking high-profile breaches, the group plunged 40.5% in five months. CyberArk stock, too, was tugged down 38% in the back-half of 2015. But, Mokady says, while panic does play into stock prices, it doesn’t touch CyberArk’s sales. “Some vendors … are more driven by emergency spending and you need to be breached in order to dial their number,” he said. “We’re not seeing a change in demand. But we’re also a very prudent company.” Analysts are banking on that prudence. At least five analysts cut their price targets on CyberArk stock Friday, but at least three said the firm’s guidance was conservative. CyberArk Q4, 2015 Beat Estimates For Q4, CyberArk reported 39 cents earnings per share ex items on $51.5 million in sales, up 86% and 42%, respectively, vs. the year-earlier quarter, and topping the consensus model for 20 cents and $43.9 million. License revenue of $33 million accounted for 64% of revenue, Piper Jaffray analyst Andrew Nowinski wrote in a research report. Nowinski cut his price target on CyberArk stock to 55 from 67 but reiterated his overweight rating. “Demand remains very strong, highlighted by a book-to-bill ratio of greater than 1,” he wrote. “They even had some larger deals with oil/gas companies, despite increasing macroeconomic pressure on that sector.” For Q1, CyberArk sees $42.5 million to $43.5 million in sales, topping the consensus for $41.6 million, and up 30% at the midpoint. But the EPS ex items view for 15-16 cents trailed analyst expectations for 17 cents, and would be flat to down 6%. CyberArk guided to $205 million to $207 million in 2016 sales, up 27% at the midpoint and above expectations for $202.3 million. But the EPS view for 83-86 cents would be down 15.5% at the midpoint and missed the consensus model for 91 cents. Mokady said he doesn’t “call that a miss.” “We provided guidance we believe in, and I guess the consensus was different,” he told IBD. “We think the prudent strategy is for us to invest. … That’s been guiding us as we planned our 2016.” Attack Lull Slams Cyberstocks The lull between attacks drew cybersecurity stocks down, PureFunds CEO Andrew Chanin told IBD. Chanin runs the HACK ( HACK ) ETF which includes CyberArk, FireEye, Check Point Software Technologies ( CHKP ), Cisco Systems ( CSCO ) and Fortinet ( FTNT ). Symantec ( SYMC ) stock leads the Top 10. HACK stock was flat Friday afternoon, hurt by CyberArk’s plunge. “That sharp move down today caught me by surprise,” Chanin said, noting CyberArk’s Q4 metrics were largely within expectations. “Investors that got into the space over the past year are probably licking some of their wounds right now, because it has been a very volatile ride. “I don’t think we’ve had a catastrophic attack yet. That could be the next major catalyst for the industry. … Investing is partially emotional.” During last year’s 30-day Cyber Sprint, the federal government acknowledged its shortcomings in privileged account management, CyberArk’s bread-and-butter, Mokady said. Now, credential protection is almost “the basic action.” That spotlight should benefit CyberArk, Summit Research analyst Srini Nandury wrote in a report. Nandury cut his price target on CyberArk stock to 30 from 47 but maintained his hold rating. Nowinski, William Blair analyst Jonathan Ho and Dougherty analyst Catharine Trebnick noted CyberArk’s conservative guidance. Dougherty expects to see “several quarters of beat and raises in 2016.” FireEye Sees Widening Q1 Losses Wall Street offered FireEye stock a caveat Friday as at least five analysts cut their price targets: The company’s transition to a platform service is well underway. For Q4, FireEye reported $184.8 million in sales, up 29%, and a per-share loss of 36 cents, better by a penny vs. the year-earlier loss. Billings of $257 million jumped 21%. Sales were just shy of the consensus model for $185.3 million. Analysts had modeled a per-share loss of 37 cents. And Pacific Crest analyst Rob Owens noted FireEye posted “massive deceleration in billings and revenue.” But Owens rates FireEye stock overweight. FireEye’s 2015 sales jumped 46% year over year to $623 million, a hair short of the consensus model for $623.4 million. But its per-share loss of $1.30 was 67 cents better than the 2014 metric and beat Wall Street views for $1.62. Billings of $797 million grew 35% year over year. Current-quarter sales guidance for $167 million to $177 million, up 37% at the midpoint, was at the low end of analyst expectations for $167.9 million. And FireEye’s per-share loss outlook for 49-53 cents missed Wall Street’s model for 40 cents. For Q1, the company expects $163 million to $183 million in billings, up 14% at the midpoint. FireEye Makes A Platform Play FireEye’s subscription-as-a-service and product platform expansion “could position the company to be a premier facilitator of organizations’ broad cybersecurity needs,” William Blair’s Ho wrote in a report. The transition would put FireEye in rivalry with Palo Alto Networks ( PANW ), another platform peddler. But the shift in demand is a concern, Owens wrote. “We believe FireEye is executing well on becoming a platform play, but the sudden demand shift from physical appliances to cloud-based offerings creates near-term risk,” he wrote. During Q4, product revenue declined 2%, but subscription revenue jumped 57.5%. International sales grew 70%, helping FireEye recover from a Q3 belly flop that caused shares to dive in November. Further into 2016, Ho expects FireEye to balance its investments amid the slowing “reactionary spending” environment.