Credit: Summary:
Check Point delivered better-than-expected second-quarter results. While the third-quarter revenue guidance was unexciting, we expect Check Point's strong position in the network security market and the rapid adoption of its new products to support revenue growth. Moreover, Check Point's settlement with the Israeli Tax Authorities is a long-term positive. The company's continuous share buybacks also bode well for investors. However, stiff competition, an uncertain economic environment, competitive pressures and currency fluctuations remain the headwinds. Thus, we reiterate our Neutral recommendation on Check Point shares.
Overview:
Founded in 1993, Check Point Software Technologies Ltd. has evolved into a well-known provider of information technology (IT) security solutions across the world. The company is headquartered in Tel Aviv, Israel and offers a comprehensive range of software and combined hardware and software products aimed at IT security. Attached either to an operating system, a computer device, a server or a virtual desktop, the solutions cover network and gateway security, data security and management needs. Though the company is incorporated in Israel, consolidated financial statements are presented in accordance with the United States generally accepted accounting principles.
Check Point entered the industry with its breakthrough product, FireWall-1, equipped with the stateful packet inspection technology. A firewall is a device or a set of devices designed to protect networks from unauthorized access, while permitting legitimate communications. Stateful Inspection technology, invented and patented by Check Point, runs on a firewall or a PC and helps to extract and maintain extensive data for providing a framework for future screening decisions, from relevant communication layers. It also expedites network traffic inspection. However, Check Point has expanded its footprint from "firewall" to include a full enterprise security offering with endpoint security, remote access and network security.
The company's network security gateways protect customer data, reduce security complexities and lower the total cost of ownership. Customers are able to implement their security policies on traffic between internal networks and the Internet, as well as between internal and private networks that are shared with partners.
Check Point's solutions are deployed in nearly all Fortune 100 and Global 100 companies and in over 98% of the Fortune 500 and Global 500 companies across enterprises, service providers, small and medium sized businesses, and consumers. Its products and services are sold through a network of channel partners, including distributors, resellers, value-added resellers, system integrators and managed service providers.
The company operates one reportable segment and its revenues are mainly derived from the sales of its network and data security products and related software updates, maintenance, support and other services. Check Point has its operations in different geographic regions including the Americas, Europe and the Asia-Pacific, Middle East and Africa.
The market for Internet security solutions is intensely competitive, with well-capitalized players, such as Cisco Systems Inc., Juniper Networks Inc., Symantec Corp. and Microsoft Corp. Although Check Point has been a leader in critical network security markets through its VPN products, it is now coming out with complete end-to-end security solutions. Check Point faces tough competition as it moves into appliances against Cisco and Juniper, and into endpoint (PC) against Symantec and McAfee (acquired by Intel Corp.). Besides threats from large software companies like Cisco, Juniper and Dell, Check Point also vies against smaller, but more nimble security companies like Sourcefire.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
