Profiting (Legally) From Cyber Insecurity
“Everybody points to security as one of the top needs in the enterprise, but the spending rarely translates into any of these stocks,” Spivak says. “Just because security is hot doesn’t mean the stocks are going to outperform. It hasn’t always worked out in the near term.”
In its most recent guidance, for example, Sourcefire warned of slower near-term growth because of spending cuts in the federal government.
“In the short term, our federal government doesn’t necessarily have a budget plan in place,” Owens says. “We’re not seeing the associated spending increases that we’d like to, especially to protect our cyber infrastructure. One of your largest consumers of this technology currently is on a flat spending budget on a year-over-year basis. You’ve got austerity programs internationally, as well, that are somewhat mitigating the near-term spend opportunity.”
But analysts note that the long-term outlook remains strong.
“The federal government is and has been one of the most attempted-to-be-hacked organizations in the world,” Spivak says. “They have to invest in this area.”
And because cyber criminals operate a step ahead of the technologies designed to thwart them, there will always be opportunities within the sector for investors.
“Given the attacks that we’re seeing on a national level, on a local level, and in enterprises, we’ll continue to see a ramp in cyber security spending over the next five to 10 years,” Owens says. “A pretty dramatic ramp, which should set up a pretty positive fundamental backdrop for a majority of these companies.”