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IT security companies stand up to a growing cyber threat

IT security companies stand up to a growing cyber threat

22-02-2016 | Article
  • Matthias Mueller
    Matthias
    Mueller
    CFA, Senior Equity Analyst

Cybersecurity: a growing market for IT security solutions

A quick look at newspaper headlines reveals a wave of recent high-profile data security breaches compromising millions of customers’ personal details, passwords and financial data. Companies from a variety of sectors including financial services provider JP Morgan, health insurance company Anthem, and retail giant Target have all been hit by a cyber-attack within the last few years. With such an omnipresent cyber threat, it is no longer a matter of if, but when an organization is attacked – and how it defends itself.

And companies are taking note. According to IT research provider Gartner, global spending for information security is expected to be more than USD 100 billion in 2015. Over the next four years, the market is expected to grow another 8.7%, reaching about USD 150 billion by 2019.¹ As IT budgets expand to keep pace with the growing cyber threat, IT security solutions providers are expected to benefit, in turn offering investors a range of investment opportunities. 

While conventional cybersecurity solutions such as antivirus software, firewalls or email/web filters are still an important first line of defense, in a world of big data and multiple access rights, more sophisticated software solutions are required. For example next-generation firewalls move beyond simply identifying threat signatures and monitor behavioral patterns of external intruders trying to access a network. Advanced threat protection (ATP) solutions, on the other hand, focus on internal threats by analyzing abnormal user traffic behavior. And encryption software solutions encode information so that only authorized parties can decode and read it. As the cybersecurity sector continues to evolve, many other technologies such as big data analytics, threat intelligence or cognitive security are also beginning to emerge. 

Companies that offer integrated security solutions in their software or hardware products and pure play IT security companies specializing in the latest dynamic IT security technologies should benefit from increased IT security spending.

Although the IT security segment is growing quickly, it only accounts for a fraction of total revenues for integrated solution providers such as Cisco or Juniper Networks. But for pure-play companies focusing exclusively on IT security solutions such as Palo Alto Networks, FireEye or CheckPoint Software, growing IT security spending has a much stronger impact on corporate value.

1 Gartner: Information Security, Worldwide, 2013-2019, 1Q15 Update

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