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Protection from Corporate Terrorism

06/18/2004 12:00 am EST


Neil George

Editor, Profitable Investing

"Security isn’t just about securing our nation against terrorists," says Neil George, editor of Personal Finance. "It’s increasingly about protecting corporations. Here are some of our top ideas in the  burgeoning security and risk management field."

"From entire corporate inventory control systems to airline reservation systems, to the laptops of salesmen, computer virus threats are costing billions in disrupted business. Security also means controlling access to companies and identifying who is a customer or employee doing his job rather than someone about to wreak havoc on a company. It also means securing important records of financial and business transactions and securing products after they’ve left the factory to prevent against fraud and knock-offs. All of these threats and many others beyond them are why corporations are spending huge sums to defend against increasingly smarter and more diabolical system threats.

"At the core of company protection are security guards who watch everyone come and go in and out of the corporate facilities. Many of these services are done in-house and by small local companies. But with more sophisticated and broader threats, in-house isn’t cutting it anymore. This will lead to more specialists armed with better training and better service. ABM Industries (ABM NYSE) has been working for US companies for nearly a century. The company provides security services as well as complimentary facilities management that has enabled revenues to climb by double-digit margins. Profits are fat as well, and in a market that values cash on the barrel, ABM comes through with a nice dividend. Buy up to 22.

"Beyond the guys with guns and walkie-talkies, companies need electronic monitoring systems and armor to defend against the most violent physical threats. This means Armor Holdings (AH NYSE) will get more of the calls to protect companies with locations inside and increasingly outside the US. The company also provides armament for vehicles. As protestors are increasingly embracing rioting as their means of attention getting, Armor Holdings' gear and services are helping private industry brace for these onslaughts. Buy up to 42.

"Empowering the guards beyond their defensive gear to protect the office and plant are higher-tech surveillance and recognition systems. This enables even the most novice protectors to know who should be allowed in and who should be kept far away. With companies larger and far-flung, recognizing who’s who is a challenge. And that’s where Viisage Technology (VISG NASDAQ) comes in. The company provides facial and other bio-recognition equipment and services that are now becoming the norm for high-traffic and high-risk businesses such as casinos, to sensitive government installations. This highly effective and secure system will only become more pervasive in the market. Buy a little now, below 14.

"And alongside the recognition of folks right up close is the ability for security to scan areas and even whole groups of people visually, as well as the ability to track telephone calls and sift through e-mails and faxes. This way the bad guys both inside and outside companies can be quickly identified. Verint Systems (VRNT NASDAQ) has a collection of hardware and software that scans and seeks out potential threats using image verification as well as voice and data scans. It also can quickly route information to the proper authorities, before any damage is done. It’s new and it’s definitely winning its share of converts. Verint is a speculative buy up to 31.

"One of the biggest lessons learned by companies from recent disasters and physical attacks around the world is how necessary it is to have a recovery plan. At the core of a successful plan is having backup data and to have it stored somewhere far away in secure locations. When it comes to putting that type of plan into action, there’s only one choice for any corporate behemoth—Iron Mountain (IRM NYSE). Yes, the name is quite fitting, as it has developed its business over the last half a century to secure and manage a mountain of data and records for everyone that’s anyone in the business of business. With secure locations and processing facilities, the company continues on a long-term tear, particularly in the wake of recent dramatic attacks in key business cities across the globe. Buy up to 46.

"Beyond observing movement and behavior of employees, customers, and threatening figures, just as important is the ability to scan incoming shipments either from the port, loading dock, or mailroom. As we’ve seen from contamination to bomb scares, having a handle on what’s coming into offices is just another core way of providing needed security. This is where OSI Systems (OSIS NASDAQ) comes in. Its scanning equipment provides a company the hardware as well as key components for various large- and small-scale security monitoring and screening processes. OSI is a buy in small bites up to 25.

"E-mail used to be entertaining and very useful—and still can be if you have the right software to guard against abuse from geeks and hackers. If you’ve ever been victimized by a virus or a worm, you know the pains of not being protected. And with newer viruses, you don’t even have to open a bad e-mail to get your PC or your whole company’s network shut down. This is where there are just two companies that are both the first and the last line of defense. Symantec (SYMC NASDAQ) is first with its Norton Utilities for the basic needs. For higher-end networks, it offers a collection of scanning and recovery programs. And along side Symantec is Network Associates (NET NYSE) with its similar blend of consumer and light business applications sold under the famous McAfee label, as well as higher-end, larger-scale products and services. Buy them both in small increments with Symantec up to 50 and Network Associates up to 19."

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