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Net Security Stocks: A Solid Corner of Tech By David Bogoslaw November 4, 2009 7:06AM     Among customers' spending priorities are technologies that promise high return on investment and nondiscretionary products like security and compliance software. Software should stand up better in the downturn than in the past due to companies' larger recurring revenue bases, tighter cost controls, and stronger balance sheets.   Related Topics Network Security Symantec Stock Market VeriSign McAfee Identity Theft Latest News Plasma-TV Ban Could Be Costly Barnes & Noble Nook Is Delayed Flat PC Shipments Hurt Dell's Stock Ballmer Says Windows 7 Sales Good New Pogoplug 'Cloud' Gets Social With more and more people using the Web for business transactions and routinely typing in their credit-card digits on various sites, rising concerns about identity theft and other cybercrimes have put companies that provide Internet security products in the catbird seat. While Symantec and McAfee have hitched their wagons to Microsoft , on hopes that the new Windows 7.0 operating system will drive sales of their security software, other companies' business models aren't tied to the fortunes of Redmond & Co. Like VeriSign, for example. The Mountain View [Calif.] company collects $6.87 for every new dot-com Web site it registers and $4.24 for every dot-net address it assigns under an exclusive seven-year contract with the Internet Corporation for Assigned Names & Numbers, known as ICANN, a nonprofit oversight body that coordinates domain names for the U.S. Commerce Dept. SSL Profitability Concerns Analysts estimate the Web infrastructure and security outfit added about 1.4 million domain names in the third quarter, which would be a 27 percent increase over the preceding quarter and ahead of the company's forecast of 900,000 to 1.2 million additional registrations, according to Oppenheimer analyst Shaul Eyal in an Oct. 22 research note. That bodes well for third-quarter earnings, which the company is scheduled to report on Nov. 5. As the global economy continues to recover, "international growth could again crank up and provide a kick-start to recovery" in domain name additions, Eyal said. While the company enjoys a virtual monopoly in the domain name business, there are still concerns about the profitability of one of its key businesses: security socket layer, or SSL, certificates, which merchants buy from the company in order to enable the encryption of sensitive information during online transactions and authenticate information about the certificate owner. While VeriSign has a 75 percent market share in these certificates, its average selling price has continued to decline over the past several quarters. The company attributes that to the recession, which has made cost-conscious customers favor cheaper, lower-quality certificates. The average selling price was $241 in the second quarter, vs. $253 in the third quarter of 2008. VeriSign is expected to report earnings of 32 percent a share on Nov. 5, vs. 25 percent a year earlier, on projected revenue of $258.8 million, compared with $239.7 million in the year-ago period, VeriSign's results will follow on the heels of disappointing news from another marquee name in computer security. After the stock market closed on Oct. 29, McAfee reported earnings of 62 percent a share, excluding nonrecurring items, ahead of analysts' forecast of 61 percent, McAfee's revenue jumped over 18 percent, to $485 million, but fell short of analysts' $486.7 million forecast. The stock finished 4.3 percent lower on Oct. 30. (continued...) 1  |  2  |  3  |  4  |  Next Page >   © 2009 Business Week Online under contract with MarketWatch. All rights reserved.   Advertisement  Software 1.   FAA Glitch Causes Air Travel Delays 2.   Call of Duty Is Setting Records 3.   MS Told To Stop Some Windows Sales 4.   Peer-to-Peer Software Ban Sought 5.   Better Maps, Made by Volunteers

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Network Security Spotlight

House Lawmakers Push Ban on Peer-to-Peer Software Stung by an embarrassing electronic leak revealing ethics investigations into dozens of lawmakers, Congress moved to prohibit federal employees from using the file-sharing software blamed for the disclosure.   GAO: Los Alamos Computer Security Has Weaknesses Security weaknesses uncovered in Los Alamos National Laboratory's computer network increase the risk of a classified-information breach, says the Government Accountability Office.   Computer Security Firm Fortinet Plans IPO This Week Fortinet plans to go public in an initial public offering, giving investors a chance to tap a network security provider with sales that are expected to grow. The IPO could be valued at $137.5 million or more.

Enterprise Hardware Spotlight

Flat Shipments Hurt Dell Despite Increased Earnings Dell's earnings are up and expectations are solid, but the company's stock still took a hit after analysts signaled the company isn't playing a key role in the PC market recovery.   New Pogoplug 'Personal Cloud' Does Social Networking Cloud Engines has released its newest version of the Pogoplug, a small "multimedia sharing device" that connects hard drives to the Internet and allows a user to access the files remotely.   Apple Tablet Rumored Delayed as Publisher Gears Up There have been so many rumors of an Apple tablet that it has taken on legendary status. But now the legend is being revised with reports of a delay and that a major publisher is getting ready.

Enterprise Technology Spotlight

Flat Shipments Hurt Dell Despite Increased Earnings Dell's earnings are up and expectations are solid, but the company's stock still took a hit after analysts signaled the company isn't playing a key role in the PC market recovery.   Smartphones: A Bigger Target for Security Threats Smartphones are increasingly prevalent and adept at handling more tasks, including trading stocks, paying bills, and buying stuff online. That makes them attractive to thieves and hackers.   FBI Says Hackers Targeting Law Firms, PR Companies Hackers are targeting law firms and public relations companies with a sophisticated e-mail scheme that breaks into their computer networks to steal sensitive data, often linked to large corporate clients.

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