Stopping Cyber Criminals

07/22/2005 12:00 am EST

Focus:

Vahan Janjigian

Editor, Bottom Line's Money Masters Stock Report

Based on a proprietary quantitative model, The Forbes Growth Investor maintains a list of the Top 50 Stocks, which it considers as strong buys. Here, editor Vahan Janjigian looks one of the newest additions to the list - a play on Internet security.

"The Internet is now widely used for commercial transactions. As a result, cyber criminals find it tempting to gain access to sensitive data. MasterCard International recently said its security protocols were breached at a card processing center. This resulted in the exposure of personal account information on 40 million customers. While most breaches are not this extensive, it is clear that a significant breach could cost a business millions of dollars.

"Check Point Software (CHKP NASDAQ) provides Internet security solutions designed to prevent unauthorized access to information technology resources used by enterprise and high-end networks, service providers, small- and mid-sized business, and personal computers. The company’s solutions offer protection from hackers, spyware, and data theft. Products run on a wide range of hardware platforms and support numerous operating systems including Microsoft Windows, Linux, Sun Solaris, and Nokia IPSO. Product offerings fall into three classes.

"The firm's perimeter security products consist of solutions to control access between internal and external networks. This is accomplished by Virtual Private Networks (VPNs), which encrypt and authenticate Internet-based traffic, and firewalls, which control traffic to and from networks. Products include VPN-1 Pro, SecureClient, SecureRemote, SmartCenter, Eventia, Check Point Express, and VPN-1/FireWall-1 VSX. Internal security products target threats within the boundaries of a network.

"InterSpect is the world’s first internal security gateway offering the most extensive internal network safeguard from cyber attacks originating from inside a network. This is done by segmenting a network into several security zones, controlling the traffic between them, and blocking harmful threats such as worms and viruses. Web security products offer protection for the client’s entire Web infrastructure. Products consist of Connectra, an integrated solution offering secure socket layer (SSL) VPN remote access and Web security, and Web Intelligence, which protects Web servers from application level attacks.

"After posting a slight year-over-year gain in 2003, revenues jumped 19% to $515.4 million in 2004. Pro forma net income improved 14% to $278.7 million or $1.07 per share. Results were helped by the launch of several products including the InterSpect and the Web security products noted above. Growth has continued into the current year. Q1 net revenues jumped another 19% year-over-year to $137.7 million. Pro forma net income climbed 17% to $75.8 million or 30 cents per share. GAAP net income was $73.7 million or 29 cents per share. Q2 revenues and earnings per share are expected to rise 12-17% and 21-25%, respectively.

"Investment concerns include competition and liabilities that may arise from possible defects in software products. Yet demand for CHKP’s unique security solutions is growing. Furthermore, we are confident that Internet security will remain a high priority item for all businesses as they expand their networks and rely more on mobile, remote, and wireless communications. Incidents such as the MasterCard attack only publicize the need to make networks more secure."

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