On Guard At CyberGuard

By Gene G. Marcial

Leaping Higher
Cyberguard (CGFW ), No. 4 in Web network security, is gaining fast on bigger rivals Cisco Systems (CSCO ), Juniper Networks (JNPR ), and Check Point Software Technologies (CHKP ). Since Juniper acquired NetScreen Technologies in February, the buzz has been that CyberGuard (CGFW ), best known for firewalls, will be the next target, says Brian Harvey of Kingfisher Capital Management, which owns shares.

CyberGuard's firewall systems keep out hackers, spam, and viruses. They also prevent employees from using inappropriate Web sites. Its firewall "is the most secure in the industry -- it has never been violated," says Harvey. Juniper, he believes, is still on the hunt for greater presence in security. Its next target could be CyberGuard, says Harvey, who figures the stock, now at 9, could fetch 18 to 20 in a buyout. Cisco is also a likely suitor, says Jeff Putterman of investment firm William D. Witter, which owns 7%. The Juniper-NetScreen deal, he says, could spur Cisco to act.

Says CyberGuard CEO Patrick Clawson: "We're in a hot industry, with a hot product, so there's logic behind the speculation. Our goal is to build the fastest-growing company." Jonathan Ruykhaver of Raymond James & Associates, says awareness of CyberGuard is growing as sales rise. He sees CyberGuard earning 25 cents a share in fiscal 2004 ending June 30, and 37 cents in 2005, vs. 15 cents in 2003.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

See Gene on Fridays at 1:20 p.m. EST on CNNfn's The Money Gang.

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