The importance of cyber security continues to grow since the extramarital dating web site Ashley Madison was hacked and its membership information leaked. Both consumers and businesses are starting to feel, rather than simply understand, the shocking vulnerability of digital information.
Despite the flood of scandal from the NSA revelations last year, too many Americans simply felt their privacy was untouched. The Sony scandal laid bare a treasure trove of e-mails from the heart of Hollywood, and people bathed themselves in the scandal of others.
But Ashley Madison struck too close to home for many people. Regardless of how you feel about the company, there’s a sense of vulnerability caused by the leak. And it will play out in financial markets. More people than before will pay to keep their information safe.
The scandal created a market need, and where there is need, a savvy business finds opportunity.
Cyber Security is the Next Internet Gold Rush
I expect to see a flurry of new entries into cyber security, but there are already some well-established players in the market. Leaders like Fortinet Inc. (NASDAQ:FTNT) and Check Point Software Technologies Ltd. (NASDAQ:CHKP) are already valued at billions of dollars.
Fortinet’s market cap is roughly $7.17 billion and it made $240 million in revenue last quarter, beating estimates by nearly six percent. Earnings per share also came in slightly above expectations at $0.03 per share. (Source: Yahoo! Finance, September 2, 2015.)
If you think that’s impressive, Check Point’s $14.17 valuation is almost twice as large as Fortinet’s, and its earnings per share is $3.56 for the previous 12 months. Having an early foothold into a young industry will pay off for these firms, if only for one reason. (Source: Yahoo! Finance, last accessed September 2, 2015.)
Chart courtesy of www.StockCharts.com
Cyber security is a trust-based industry. The services they provide are specialized in nature, and clients will not be experts in it. Under such circumstances, the large incumbent firms in an industry have an edge over smaller competitors, because a history of clients and projects is an implicit seal of trustworthiness.
Every day, we’re seeing more companies seek the protection of cyber security firms. There is an ongoing war between the hackers and security professionals, and companies will need to hire digital mercenaries in order to survive.
More Firms Look to Cyber Security as Threats Elevate
There are major deals underway in the industry to exemplify my optimism.
For instance, Visa Inc. (NYSE:V) joined forces with FireEye, Inc. (NASDAQ:FEYE) to provide threat intelligence tools and services for credit card companies. By combining their respective strengths, these two firms are providing industry-tailored protection to customers—a smart move by all accounts.
To borrow a cliché from the corporate jargon Hall of Fame, there is tons of “synergy” to capitalize on. Another example of overlap between firms is the deal with Vodafone Group Plc (NASDAQ:VOD) and CyberArk Software, Ltd. (NASDAQ:CYBR).
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The telecom giant integrated CyberArk Enterprise Password Vault and CyberArk Privileged Session Manager for its privileged accounts, identities, and applications.
“It’s exciting to be working with Vodafone during the initial stages of its new PUMA program,” said Nick Baglin, a vice president at CyberArk.
“Vodafone is an extremely forward-thinking company and we’re delighted to help them proactively address the critical challenges around the security and management of privileged accounts.” (Source: CyberArk Press Release, May 14, 2015.)
Dear readers, think of the constant headlines of hacks, leaks, and exposed data. It’s an open secret that cyber warfare is upon us all. If you’re looking for a key takeaway, it’s this: information is an asset, and in order to protect it, people will pay.