Check Point Software Technologies Ltd. (CHKP), whose drop in third-quarter billings spurred the biggest stock plunge in nine years, will seek to increase revenue as more cyber threats loom, Chief Financial Officer Tal Payne said.
The technology company sank 13 percent to $41.15 in New York yesterday, the most since July 2003, on concern revenue growth will slacken after billings fell. Check Point led declines on the Bloomberg Israel-US Equity Index (ISRA25BN) of the most- traded Israeli companies in the U.S., as the measure lost 1.3 percent to $87.61. Mellanox Technologies Ltd. (MLNX) tumbled the most in more than two years in Tel Aviv today after the company forecast fourth-quarter sales that missed analysts estimates. Israel’s TA-25 Index (TA-25) lost 1.3 percent at the close in Tel Aviv.
Check Point’s third-quarter billings dropped 1 percent because of falling demand in Europe, according to Nomura Holdings Inc. and FBN Securities Inc. Payne attributes the drop to the company’s shift to a new product and says revenue will rise as intelligence agencies are seeing growing cyber menaces.
“With cyber attacks becoming more and more sophisticated, this presents us with greater opportunities,” Payne said by phone yesterday from Check Point’s Tel Aviv headquarters. “We have been going through a transition from our old product to our newer product that increased the number of units but reduced our average sales price and therefore our product revenue is muted.”
Sales for the three months ended September rose 7.8 percent to $332 million, Check Point said in an e-mailed statement yesterday. The company forecast fourth-quarter revenue of $355 million to $387 million, which compares with the $382 million average estimate of 27 analysts surveyed by Bloomberg.
The benchmark Tel Aviv gauge has advanced 12 percent this year, double the 6 percent advance by the Bloomberg Israel-US Index.
Check Point faces more competition from rivals including Santa Clara, California-based Palo Alto Networks Inc. (PANW), F5 Networks Inc (FFIV) and Surefire as well as Cisco Systems Inc. (CSCO) and Juniper Networks Inc., FBN Securities said.
“There are open questions about the competitive situation getting more heated,” Shebly Seyrafi, an analyst at FBN Securities who lowered his 12-month target price on Check Point to $60 from $70, said by phone from New York yesterday.
Palo Alto, which raised more money than planned in its initial public offering in July, has advanced 56 percent since its debut.
Check Point shares are down 22 percent this year, poised for the biggest annual slump since 2002. The retreat sank valuations to 13 times forward earnings, the lowest multiple versus the average company’s ratio on the Nasdaq Composite Index (CCMP) since December 2010.
“The market has always been competitive,” Payne said. “Cisco has always been a good player, and Juniper. We see Palo Alto Networks as well, but there has always been a lot of competition.”
U.S. Defense Secretary Leon Panetta said this week that the Pentagon and American intelligence agencies are seeing an increase in cyber threats that could become as devastating as the Sept. 11, 2001, attacks if they aren’t stopped.
Attackers “are targeting the computer control systems that operate chemical, electricity and water plants, and those that guide transportation throughout the country,” Panetta told the annual awards dinner of Business Executives for National Security in New York on Oct. 11. In recent weeks some large U.S. financial institutions were hit by attacks that delayed or disrupted services on customer websites, he said.
Israel, which has a population of similar size to Switzerland, has about 60 companies traded on the Nasdaq Stock Market, the most of any country outside the U.S. after China. The nation is also home to more startup companies per capita.
Mellanox, the maker of products used to transfer and store data, plunged 24 percent to $74.85 at 5:50 p.m. in New York yesterday. The Tel Aviv shares dropped 22 percent, the most since July 2010, to 303 shekels today, or $79.46.
The Yokneam Elit, Israel-based company said after the close yesterday that it forecast fourth-quarter sales of $145 million to $150 million, below the $156.6 million estimate of 13 analysts surveyed by Bloomberg.
Given Imaging Ltd. (GIVN) rallied 11 percent to $17 at 5:50 p.m. after the close of trading in New York yesterday. The Tel Aviv shares surged 21 percent, the most on record, to 69.80 shekels, or the equivalent of $18.30, today.
The maker of pill-sized cameras for diagnosing digestive ailments, based Yokneam, Israel, said it’s evaluating merger and sale offers.
Internet Gold-Golden Lines Ltd. (IGLD) jumped 23 percent to $5.08 yesterday, extending its gain since Oct. 12 to 68 percent. The company’s shares in Tel Aviv today advanced 3.6 percent to 18.34 shekels, or the equivalent of $4.81.
Israel’s Communications Minister Moshe Kahlon, who championed a plan to set up a fiber-to-the-home network, said this week that he won’t stand in the next parliamentary elections. Kahlon is seeking to introduce a wholesale fixed-line market to be set up by the state-run Israel Electric Corp. to compete with fixed-line operators.
To contact the editor responsible for this story: Emma O’Brien at Eobrien6@bloomberg.net