Symantec Inks Deal With Fireglass, Boosts Security Platform
Cybersecurity firm Symantec Corporation SYMC recently inked a deal to acquire Fireglass, an Israel-based company, for an undisclosed amount. The acquisition is aimed to enhance Symantec’s products to protect business email and web browsing from threats.
About Fireglass
Founded in 2014, Fireglass helps to protect confidential information from any device by eliminating malware from web and email without the need for endpoint software. The company, which has some 40 employees, focuses in an area of security called "browser isolation," a technology that creates virtual websites allowing users to browse any content without having viruses harm their network.
The Fireglass browser Isolation Platform eliminates the risk of malware by isolating and executing all Web content in the public or private cloud and delivering only safe, malware-free rendering information to the user's device.
Will Symantec Benefit from the Deal?
In our opinion, the acquisition will be a strategic fit for Symantec, which is striving to expand its business in the high growth area of next-generation cybersecurity. The acquisition will help Symantec enhance its capabilities in identity protection, which is currently a huge concern for almost every sector, be it financials, retail or technology.
According to Greg Clark, Symantec CEO, “Integrating Fireglass’ isolation technology with Symantec’s existing endpoint, email and secure web gateway solutions could reduce security events by as much as 70 percent, while virtually eliminating advanced threats spread by web browsing or email content.”
The acquisition also helps Symantec to strengthen its Integrated Cyber Defense Platform. This in turn will outspread the Company’s leadership position in Secure Web Gateway and Email protection delivered both on premises and in the cloud.
Need for Cybersecurity
Cyber security is growing into a major concern for organizations of all sizes. The growing security threats and hacking attacks over the past year or so have revealed the increasing sophistication of the hackers and innovative hacking techniques.
Going forward, the deal comes at an appropriate time as the world just witnessed the impact of ransom ware, WannaCry. Notably, the cyber security market has experienced rapid growth in recent times driven by higher spending from enterprises that are focused on eliminating vulnerabilities in their systems.
Per Cybersecurity Ventures, cybersecurity spending will exceed $1 trillion in the period from 2017–2021. According to market research firm Gartner, worldwide spending on information security is expected to reach $90 billion in 2017, an increase of 7.6% over 2016, and to top $113 billion by 2020.
We believe that the acquisition will enhance Symantec's capabilities in identifying theft protection solutions, thereby enabling it to capitalize on the growing opportunities in the space. Apart from this, the acquisition will broaden Symantec's customer base.
Bottom Line
Of late, Symantec's top and bottom lines have been under pressure due to persistent weakness in PC sales and loss of market share in the data storage segment. Additionally, intense competition from Palo-Alto Networks PANW and FireEye FEYE has been eroding its market share in the enterprise segment.
As a result, the company takes the acquisition route to transform its struggling business. In Feb this year, the company completed the acquisition of Arizona-based LifeLock Inc. in less than three months from signing the deal. The two companies entered into a definitive agreement last November, under which Symantec agreed to pay $2.3 billion in cash to make this buyout.
We believe that these acquisitions will enable Symantec to strengthen its position in the security market.
It should be noted that the company's restructuring initiatives have been appreciated by investors which can be witnessed from its share price appreciation over the last one year. During the said period, the stock has returned 33.9% compared with the Zacks categorized Computer-Software industry's gain of 28.1%.
However, it carries a Zacks Rank #5 (Strong Sell). This is probably due to its recently provided revenue outlook for the first quarter of fiscal 2018, which fell short of our estimates. This undermines the company's growth potential. Although the company's restructuring initiatives appear to be in the right direction, we are cautious about the payback period.
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Applied Materials has long-term expected earnings growth rate of 16.6%.
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