http://www.forbes.com/newswire/2001/09/26/rtr371338.html Reuters 09.26.01 By Elinor Mills Abreu MENLO PARK, Calif., Sept 26 (Reuters) - Growth rate forecasts for the computer security sector, which range between 25 percent and 50 percent, are too high and need to come down at least 8 percentage points to be realigned with a slower economy, a financial analyst said on Wednesday. Last week's Nimda virus outbreak and the events of Sept. 11 demonstrate how computer security will become more vital to business going forward, said Gene Munster, a senior research analyst at investment bank USBancorp Piper Jaffray. However, nothing can eclipse the economic fallout from last year's Internet bubble burst and the slowdown in the global economy, he told a group of venture capitalists during a presentation on the future of the computer security market. "The fundamental market is really bad right now," Munster said. "People are not spending money as fast as these companies are growing." Munster said the deadly Sept. 11 attacks -- which came at a crucial time for many companies that do a lot of their business in September following slow summer months -- could result in revenue shortfalls of 20 percent to 30 percent for software companies. While customers have cut their spending across-the-board, computer security companies are planning to spend 10 percent to 15 percent more than they did last year, according to Munster. "Budget cycles and sales cycles need to be realigned," he said. Meanwhile, computer security stocks have dropped an average of 70 percent over the past year, compared to the 58 percent drop of the Nasdaq, Munster noted. Wall Street analysts recently cut their revenue projections for computer security companies an average of 8 percent as a result of the continued economic atrophy and the Sept. 11 attacks. CATALYSTS FOR GROWTH While the timing of the deadly attacks was bad for many companies, for computer security companies it will mean more sales in the long run as security and disaster recovery become more of a priority than cost reduction, Munster said. "We're not talking about a bubble effect here," said Munster. "We're talking about real changes." In addition, the Nimda virus that wormed its way into thousands of computers last week, spreading through e-mails and holes in Microsoft Corp.'s Web server software, also raised a red flag. For example, a large financial institution, with more than 50,000 employees, lost its Internet access for eight days as a result of the virus, according to Munster. "This is just the beginning; at least once a year we'll see a massive attack, and they're getting more sophisticated," he said. "I'm not trying to be an alarmist. I'm just trying to talk about the reality here." Recent legislation mandating the protection of financial and medical data, requiring large companies to report security strategies and codifying digital signatures will also provide a boost. That's good news for companies that sell firewalls, antivirus, authentication and virtual private network products and services. Virtual private networks allow companies to use public networks securely. Other key growth areas will be vulnerability assessment, intrusion prevention, biometrics and managed security services, Munster said. One security area where investments could be reduced is wireless. "The theme with companies is we've got to get back to basics," he said. As a result, "I think you're going to see investments pull back" from wireless. - ISN is currently hosted by Attrition.org To unsubscribe email majordomoat_private with 'unsubscribe isn' in the BODY of the mail.
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