[ISN] Check Point Becomes Traffic Cop to Boost Internet Security Lead

From: mea culpa (jerichoat_private)
Date: Sat Feb 27 1999 - 02:07:41 PST

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    Check Point Becomes Traffic Cop to Boost Internet Security Lead
    Bloomberg News
    February 24, 1999, 12:33 a.m. PT
    Check Point Becomes Traffic Cop to Boost Internet Security Lead
    Tel Aviv, Feb. 24 (Bloomberg) -- Check Point Software Technologies Ltd.,
    whose firewall software protects corporate networks from hackers seeking
    to break in over the Internet, wants to help companies regulate outbound
    traffic too. 
    With businesses' connections to the worldwide computer network becoming
    busier and more complex, Check Point, the world's No. 1 seller of firewall
    security software, expects growth to come from software that manages
    network traffic at Internet gateways, and plans to boost its sales force
    80 percent this year to help push new products. 
    The Tel Aviv-based company, whose customers include Clorox Corp. and
    Kyocera Communications Systems Co., says offering a suite of
    Internet-access management software will also boost sales of its firewall
    product. It hopes the strategy can help its slumping shares, which fell 33
    percent in the past month on indications sales growth is slowing. 
    ``The market is changing,'' said Gil Shwed, Check Point's 29- year-old
    co-founder and chief executive. ``We can get more value from selling more
    technology'' to the same customers. 
    The products should also help the company increase its one- third market
    share for firewalls at the expense of competitors such as Cisco Corp., its
    closest rival. 
    Slowing Sales
    Though Check Point boosted net income 74 percent in 1998, slowing sales
    growth and increased perception of risk in computer stocks has sent its
    shares tumbling from the all-time high of 56 they touched in January. They
    closed at 40 3/8 yesterday. 
    Shwed said sales will probably grow 40 percent in 1999, down from 64
    percent in 1998, even as it adds newer products, such as software allowing
    companies to prioritize traffic at Internet gateways and automatically
    allocate Internet addresses. 
    By integrating the software with the flagship firewall product, the
    company hopes to increase revenue from newer products to 15 percent of
    sales by the end of this year from about 4 percent last year. 
    ``It's very important because the firewall as a standalone cannot sustain
    itself for a long time,'' said Charlie Benshabbat, head of research at
    Roberston Stephens Evergreen Investments.  ``Because the firewall has
    become a stabilized industry, it has to have other products that work in
    conjunction with it.''
    Check Point was established in 1993 when Shwed, who programmed security
    software for Israeli intelligence during his compulsory army service, and
    two other friends realized they could capitalize on the growth of the
    Internet and the need for security from hackers. 
    The result was their firewall software, which, thanks to an alliance with
    Sun Microsystems Inc., propelled Check Point to the head of a crowded
    field of competitors such as Trusted Information Systems Inc. and Raptor
    Systems Inc. 
    Five years later, annual sales topped $141 million. In 1998, revenue was
    boosted by the surge in popularity for its virtual private network
    software, which allows companies to create secure connections between
    branch offices via the Internet. 
    In future, growth will be driven by expanding dependence on the Internet
    as a business tool. Electronic commerce volume will climb to $150 billion
    by 2000 and is expected to reach more than $1 trillion by 2010, according
    to an estimate by International Data Corp. 
    Relying on alliances with companies such as Bay Networks Inc., Microsoft
    Corp. and IBM Corp., Check Point is confident it has enough distribution
    channels to tap into the growth. The challenge will be tracking client
    ``The major strategy is coming closer to the customer,'' Shwed said. 
    ``Everyone is trying to get to the point where they can offer an
    integrated suite of security products and management products,'' said John
    Bowen, a research associate at First Albany Group, which has an
    ``accumulate'' rating on Check Point. 
    ``We think they have a good strategy, and they have a good position in the
    high-end market, and we don't expect that to change.'' 
    --Joshua Mitnick in the Tel Aviv bureau (972) 3 694-4207/sr
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