Trash-Talking Rival CEO Vows to Beat IBM on Cybersecurity Deals

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A year ago, Imperva Inc. executives were in no position to trash-talk.

The stock was in the doldrums and the data-security company was losing out on business to bigger rivals such as International Business Machines Corp.

Now, with a new chief executive officer, Anthony Bettencourt, who took over last August, and a revamped sales and marketing team, Imperva has put the tech giant on notice -- it wants those deals back.

“I won’t get them all back but I do want them all back,” Bettencourt said in a June 10 phone interview. “From a technology base, we are so far superior.”

Shares of Imperva, which specializes in firewalls for Web applications and monitoring access to databases, have more than doubled since Bettencourt came on board. The rise has been driven in part by a stream of high-profile data breaches that are spurring companies to invest in more sophisticated protection from cyberattacks. Bettencourt, who was brought in to reorganize Imperva’s sales teams after revenue fell short of expectations last year, said he’s going after contracts that total as much as $200 million.

Imperva lost 203 contracts to IBM from 2010 through the first quarter of 2015, Bettencourt said. In the last 18 months, it beat out IBM on 39 deals.

‘Weekend Hobby’

In a May 7 conference call with analysts, Bettencourt said IBM and other rivals were “world-class infrastructure companies” that have a “weekend hobby called security.” Given recent hacking incidents and their costs, “no one wants a hobbyist,” he said.

Tim Breuer, a spokesman for Armonk, New York-based IBM, declined to comment on competition with Imperva.

Bettencourt, who replaced founder and Israeli serial entrepreneur Shlomo Kramer, is trying to steal business from IBM’s Guardium unit, which helps companies protect databases.

Breuer cited a report by research firm Gartner Inc. that showed IBM’s overall security-software business grew 17 percent in 2014 to $1.5 billion in revenue, the fastest pace among the largest software-security vendors. IBM ranks third worldwide in market share behind Symantec Corp. and Intel Corp., with 6.9 percent of the market, according to Gartner.

“We continue to gain share and outpace our competition,” Breuer wrote in an e-mailed response to questions.

Upstart Companies

Imperva’s stock has climbed 26 percent this year, approaching the record high of $65.53 in March 2014. The shares fell 2.2 percent to $62.45 at 9:55 a.m. in New York. First-quarter revenue rose 42 percent to $45 million, and annual revenue is forecast to grow 26 percent to $206 million, according to the average estimate of 17 analysts surveyed by Bloomberg.

Like other upstart cybersecurity companies such as Palo Alto Networks Inc. and FireEye Inc., Imperva is broadening its range of products in order to go after bigger contracts, said Andrew Nowinski, an analyst with Piper Jaffray in Minneapolis, who recommends buying Imperva shares.

The Redwood Shores, California-based company made three acquisitions in 2014, including one to protect against denial-of-service attacks like the one that targeted Sony Pictures Entertainment, and another company that monitors the use of cloud applications to prevent the theft of employee data.

“If you have a platform approach, you can start bundling more and more products together, which is what Imperva’s doing and what the legacy vendors are doing,” Nowinski said. The strategy means Imperva will have “a much better chance of winning large deals.”

Overtaking IBM

Imperva’s growth rates relative to the industry average suggest it’s winning business from competitors, but overtaking incumbents like IBM will be an uphill battle, said Rob Owens, an analyst with Pacific Crest Securities in Portland, Oregon.

Imperva’s main challenge is “fighting the incumbency of the larger vendor, they have more feet on the street, they’re larger companies,” Owens said by phone.

Bettencourt said Imperva has “a lot of wood to chop” to reach its growth goals. The company has forecast as much as 26 percent sales growth this year, but Bettencourt said he’s trying for 30 percent. He plans to announce new areas of expansion in the third or fourth quarter, and raised about $130 million in a share sale in March to fund more acquisitions, particularly startups that would enhance the technology of existing products.

If Bettencourt succeeds, it will make the company a more attractive target to the mature software companies he’s trying to upend, said Matthew Hedberg, an analyst with Royal Bank of Canada in Minneapolis.

“Security is a consolidating industry,” Hedberg said, and Imperva is “a unique asset.”

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