Sourcefire Slumps After VMware Forecast: Washington Mover

Sourcefire Inc. (FIRE), a cybersecurity provider that works with private companies and government agencies, fell the most in more than three months after software maker VMware Inc. (VMW) projected sluggish federal government demand.

Sourcefire, based in Columbia, Maryland, dropped 6.9 percent to close at $41.84 in New York, its biggest one-day decline since Oct. 17.

VMware fell the most in four years today after forecasting sales that trailed analysts’ estimates, hurt by lower demand from corporate and government customers. The forecast prompted concern among investors about Sourcefire, said Frederick Ziegel, an analyst with Topeka Capital Markets Inc. in New York.

“If someone talks about weak federal spending, it tends to get thrown in that bucket,” Ziegel said in an interview.

U.S. federal and state government agencies accounted for 28 percent of Sourcefire’s revenue in the quarter that ended Sept. 30, according to filings.

Ziegel said he is maintaining his hold rating on the stock because Sourcefire produces security solutions that remain in demand even when the government abstains from other software investments.

“Security is a very top-of-mind subject in the government these days,” Ziegel said. “It is something that’s not postponable.”

Sourcefire is scheduled to report earnings for the fourth quarter of 2012 after the market close on Feb. 21.

VMware, based in Palo Alto, California, dropped 22 percent to close at $77.14. The stock advanced 13 percent last year compared with a 46 percent increase for Sourcefire and a 13 percent gain for the Standard & Poor’s 500 Index.

To contact the reporter on this story: Jeanna Smialek in Washington at jsmialek1@bloomberg.net

To contact the editor responsible for this story: Cecile Daurat at cdaurat@bloomberg.net

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