[ISN] Check Point Becomes Traffic Cop to Boost Internet Security Lead

http://www.news.com/Investor/NewsItem/0,213,0~3~2~Computer%20Data%20Security~AXNT~BLO~390774620~~~~~,00.html   
Check Point Becomes Traffic Cop to Boost Internet Security Lead
Bloomberg News
February 24, 1999, 12:33 a.m. PT

Check Point Becomes Traffic Cop to Boost Internet Security Lead

Tel Aviv, Feb. 24 (Bloomberg) -- Check Point Software Technologies Ltd.,
whose firewall software protects corporate networks from hackers seeking
to break in over the Internet, wants to help companies regulate outbound
traffic too. 

With businesses' connections to the worldwide computer network becoming
busier and more complex, Check Point, the world's No. 1 seller of firewall
security software, expects growth to come from software that manages
network traffic at Internet gateways, and plans to boost its sales force
80 percent this year to help push new products. 

The Tel Aviv-based company, whose customers include Clorox Corp. and
Kyocera Communications Systems Co., says offering a suite of
Internet-access management software will also boost sales of its firewall
product. It hopes the strategy can help its slumping shares, which fell 33
percent in the past month on indications sales growth is slowing. 

``The market is changing,'' said Gil Shwed, Check Point's 29- year-old
co-founder and chief executive. ``We can get more value from selling more
technology'' to the same customers. 

The products should also help the company increase its one- third market
share for firewalls at the expense of competitors such as Cisco Corp., its
closest rival. 

Slowing Sales

Though Check Point boosted net income 74 percent in 1998, slowing sales
growth and increased perception of risk in computer stocks has sent its
shares tumbling from the all-time high of 56 they touched in January. They
closed at 40 3/8 yesterday. 

Shwed said sales will probably grow 40 percent in 1999, down from 64
percent in 1998, even as it adds newer products, such as software allowing
companies to prioritize traffic at Internet gateways and automatically
allocate Internet addresses. 

By integrating the software with the flagship firewall product, the
company hopes to increase revenue from newer products to 15 percent of
sales by the end of this year from about 4 percent last year. 

``It's very important because the firewall as a standalone cannot sustain
itself for a long time,'' said Charlie Benshabbat, head of research at
Roberston Stephens Evergreen Investments.  ``Because the firewall has
become a stabilized industry, it has to have other products that work in
conjunction with it.''

Check Point was established in 1993 when Shwed, who programmed security
software for Israeli intelligence during his compulsory army service, and
two other friends realized they could capitalize on the growth of the
Internet and the need for security from hackers. 

E-Commerce

The result was their firewall software, which, thanks to an alliance with
Sun Microsystems Inc., propelled Check Point to the head of a crowded
field of competitors such as Trusted Information Systems Inc. and Raptor
Systems Inc. 

Five years later, annual sales topped $141 million. In 1998, revenue was
boosted by the surge in popularity for its virtual private network
software, which allows companies to create secure connections between
branch offices via the Internet. 

In future, growth will be driven by expanding dependence on the Internet
as a business tool. Electronic commerce volume will climb to $150 billion
by 2000 and is expected to reach more than $1 trillion by 2010, according
to an estimate by International Data Corp. 

Relying on alliances with companies such as Bay Networks Inc., Microsoft
Corp. and IBM Corp., Check Point is confident it has enough distribution
channels to tap into the growth. The challenge will be tracking client
needs. 

``The major strategy is coming closer to the customer,'' Shwed said. 

``Everyone is trying to get to the point where they can offer an
integrated suite of security products and management products,'' said John
Bowen, a research associate at First Albany Group, which has an
``accumulate'' rating on Check Point. 

``We think they have a good strategy, and they have a good position in the
high-end market, and we don't expect that to change.'' 

--Joshua Mitnick in the Tel Aviv bureau (972) 3 694-4207/sr

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