China’s government-backed hackers are reportedly back at it again after a brief period of keeping a low profile. Clearly, the cyber war is only just getting started. Three companies that look set for years of growth by protecting us from hackers are Radware Ltd. (NASDAQ:RDWR), Sourcefire, Inc. (NASDAQ:FIRE), and Fortinet Inc (NASDAQ:FTNT)
A Renewed Effort
“Three months after hackers working for a cyberunit of China’s People’s Liberation Army went silent amid evidence that they had stolen data from scores of American companies and government agencies, they appear to have resumed their attacks…” That’s from the first sentence of a recent New York Times article.
While few thought the war ended when the U.S. government openly pointed a finger at China, three months seems a short time to wait before going back at it. It suggests either an emboldened China pushing political boundaries or that hacking is so vital to the country’s current efforts that public image doesn’t matter. Either way, U.S. companies and governments, at all levels, need to be prepared.
This is Big
While hacking may seem obscure, it isn’t. The Times reports that China’s hackers “were behind scores of thefts of intellectual property and government documents over the past five years,” including such things as “blueprints, manufacturing plans, clinical trial results, pricing documents, negotiation strategies and other proprietary information…” To put that in perspective, imagine a hacker figuring out how to cripple the U.S. electric grid.
Here are three companies that help corporations and governments protect themselves:
Denial of Service Expert
All attacks aren’t of the backdoor variety. Some hit computers with so many requests for information that a system fails. This is known as a denial of service attack. While that can be just an inconvenience to users, it can be incredibly costly for a company. Radware Ltd. (NASDAQ:RDWR) is a leader in defending against such attacks.
The company has two business lines, Application Delivery and Network Security. The former is focused on making networks work better. The Network Security division provides “attack mitigation systems.” These are physical devices that monitor network and/or system activities looking for malicious or unwanted behavior. The devices react to such threats “in real-time” to stop an attack.
Radware’s top line has grown steadily over the last decade, though the first quarter’s results were flat year over year and down about 10% sequentially from the fourth quarter. The market didn’t respond kindly to that shortfall and the stock has traded notably lower. Still, the company’s often volatile earnings have remained in the black for the past three years, including in the relatively weak first quarter.
The sell off could be a buying opportunity.
Malware
Sourcefire, Inc. (NASDAQ:FIRE) also makes devices that monitor networks for security threats. In 2012, the company introduced a number of new technologies. Some of the more interesting launches were products that detect malware in networks and in the mobile world.
Malware is software that gets into a network and does, as the name suggests, something bad. That can be deleting files, bringing a network down, or providing an opening for a hacker looking to hijack a computer system. Hijacked computers can be used to attack other computers or can be rooted through for valuable information.
The company’s top line has been growing steadily for a decade. After years of red ink, Sourcefire, Inc. (NASDAQ:FIRE) turned profitable in 2009 and has made money every year since. The company’s first quarter sales were up year over year, but, like Radware, were down sequentially. Its shares dipped on the news, but haven’t been as badly impacted. Regardless, it is a good option for growth investors.
A Bigger Player
Fortinet Inc (NASDAQ:FTNT), with a $3 billion market cap, is almost twice the size of Sourcefire, Inc. (NASDAQ:FIRE) and around five times as large as Radware. The company’s lead products is FortiGate and a collection of management tools around that product. Essentially, it is an integrated portfolio of protection tools in a single package. That includes firewall, virtual private network, antivirus, intrusion prevention, web filtering, and antispam tools, among others.
Fortinet Inc (NASDAQ:FTNT)’s top line has marched steadily higher over the last few years, but earnings have been relatively stagnant. That said, the company’s bottom line is solidly in the black. Like Sourcefire, Inc. (NASDAQ:FIRE), Fortinet’s top line was up year over year, but down sequentially. That’s led to a lower share price and a potential buying opportunity for growth investors with a long-term view.
Across the Industry
The first quarter sales drop is clearly an industry-wide issue. However, the cyber threat certainly isn’t abating. In fact, it’s only likely to get worse. While these companies will always have to spend heavily on research and development to keep up with the hackers, their top and bottom lines should head higher over time, as well. Radware has taken the biggest hit recently, which means it has the most turnaround potential. Fortinet Inc (NASDAQ:FTNT), being the largest of the trio, may prove a less volatile investment over time.
Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Sourcefire, Inc. (NASDAQ:FIRE). Reuben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Protecting Ourselves From China’s Hackers originally appeared on Fool.com and is written by Reuben Brewer.
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