Cyber Paranoia Lifts Fortinet; Stock Adds $500 Million

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Security software company Fortinet Inc. jumped 10 percent in its biggest gain in more than two years and traded at a record after quarterly earnings and sales exceeded analysts’ forecasts.

The Sunnyvale, California-based company rose $3.45 to $38.08 at the close in New York, the biggest gain in the Standard & Poor’s 400 Midcap Index. Total revenue climbed 26 percent from a year ago to $212.9 million and the company reported earnings before certain items of 8 cents a share, beating the analyst consensus of 6 cents.

Fortinet’s market value jumped more than $500 million to $6.4 billion. The company went public at a split-adjusted $6.25 a share in 2009 and its stock has posted gains averaging about 13 percent in each of the past five quarters.

“Bottom line is increased cyberattacks are forcing companies to basically blindly spend on anything and everything that’s out there,” Anurag Rana, senior analyst covering software and information-technology services at Bloomberg Intelligence, said in a phone interview today.

Large scale publicized hacks at industry giants such as Sony Corp., JPMorgan Chase & Co. and Target Corp. have convinced companies to invest in defensive measures. Close to 80,000 security incidents were reported in 2014, up 16,000 from the prior year, according to a 2005 Verizon Enterprise Solutions report. Cybercrimes cost about $400 billion annually, according to McAffee estimates cited by Bloomberg Intelligence.

Security companies such as Fortinet, Check Point Software Technologies Ltd., FireEye Inc. and Intel Corp. are feeding on fear and getting a boost. The security software industry is set to expand from $30 billion to $42 billion by 2017, according to projections as of Dec. 2014 by International Data Corp.

Raytheon Co., the world’s biggest missile maker, is jumping on the bandwagon. The Waltham, Massachusetts-based company is investing $1.57 billion to create a new cybersecurity company with private-equity firm Vista Equity Partners LLC, according to a company statement.

“The market for advanced cyber solutions that protect and defend global industry and infrastructure is rapidly growing,” Thomas Kennedy, Raytheon chairman and chief executive officer, said in the release yesterday. “As the business enterprise evolves to meet the networked demands of today’s mobile and cloud economy, these threats will grow in size and scale.”

Brian Moynihan, Bank of America Corp.’s chief executive officer said on Jan. 21 that the company’s cybersecurity team can spend whatever is needed to protect the firm. “The only place in the company that doesn’t have a budget constraint is that area,” he said in a Bloomberg Television interview from Davos, Switzerland.

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