Smaller-Growth Companies in the Network Security Space Have Differentiated Products and Can Grow Without Competition: An Expert Analyst Discusses Investing in the Cybersecurity Sector

Wall Street Transcript

67 WALL STREET, New York - May 13, 2013 - The Wall Street Transcript has just published its Internet Services Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Increased Mobile Content Traffic - Chinese Online Monetization Trends - Internet Infrastructure and Services Consolidation - Social Networking Economics -

Companies include: Cisco Systems, Inc. (CSCO), Juniper Networks, Inc. (JNPR), Sourcefire, Inc. (FIRE), FLIR Systems Inc. (FLIR) and many more.

In the following excerpt from the Internet Services Report, an expert analyst discusses the outlook for the sector for investors:

TWST: You mentioned that the sector has become much more broadly recognized by investors. Even so, what are some common misconceptions or complexities about the cybersecurity sector that generalists or new investors don't always fully comprehend?

Mr. Ho: Yes, that is an excellent question. One of the challenges that we think companies face or questions that we often hear from investors is: How do we know which product is better than which other product? In many cases, vendors overstate the claims of what their boxes can do and how much security performance they can actually deliver. And so, I would say it's already difficult for industry participants that we speak with to differentiate between the claims and the reality, and I think it's even more difficult for investors to often make that distinction.

The way that I would characterize it is that we do not view the market as a zero-sum game between Palo Alto Networks (PANW) or Fortinet or Sourcefire. The reality is that many of these smaller-growth companies that are in the network security space, their products are differentiated from traditional infrastructure vendors such as Cisco and Juniper, which have traditionally held a much larger market share, and so that differentiation allows these smaller companies to grow without competing against each other as regularly as one may expect.

As a result, we don't think these companies are in a zero-sum game with each other. It's much more about the smaller players having the opportunity to gain share from the larger ones.

TWST: What industry-specific metrics do you believe are most meaningful in evaluating cybersecurity stocks?

Mr. Ho: I think when you're looking at companies in the sector, billings growth is probably the most important determination...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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