Morningstar | Check Point Remains a Leading Network Security Vendor
Check Point Software, an Israel-based network security firm, has adapted its product portfolio in recent years to strategically position itself for the secular shift in enterprises migrating toward hybrid cloud environments. The firm’s expertise in software-defined security environments should position it well for margin expansion, relative to peers’ reliance on physical infrastructure.As customers use more cloud and mobile-based processing, the potential attack vectors become increasingly serpentine, which we think could expand Check Point’s market opportunity. Check Point excels because of its large-enterprise-focused model and a broad product portfolio, yielding high renewal rates and a growing recurring revenue base. Further, we think the firm’s ability to churn out new offerings allows it to meet the rapidly evolving technological needs of its client base. The firm continues to earn exemplary marks in its threat detection rates from independent reviews. We estimate that nearly 70% of the firm’s revenue is recurring, and we see switching costs from the firm’s mission-critical security offerings for sprawling enterprise clients whose demands necessitate a vendor with ubiquitous solutions like Check Point. The firm’s focus on software blade subscriptions (which are suites of integrable software products that can be selected or deselected based on the client’s preference) sold into enterprises allows Check Point to extract respectable pricing from clients and post outstanding gross and operating margins.Check Point’s Infinity product represents the next iteration of its management console, and we postulate that clients are in a consolidation phase as they limit security subscriptions to a single vendor, which should benefit Check Point based on its reputation and expansive product portfolio.Check Point is a market leader, but secular trends such as the growth in cloud computing, the “Internet of Things,†and artificial intelligence remain on the periphery. We see these themes as potential avenues for disruption, but because each synchronously spawns added threats for Check Point’s client base, they create additional vectors for Check Point to secure.Check Point Software Technologies develops, markets and supports a range of products and services for IT security. Co. offers its customers a portfolio of network security, endpoint security, data security and management solutions. Co.'s solutions operate under a unified security architecture that enables end-to-end security with a single line of unified security gateways, and allow a single agent for all endpoint security that can be managed from a single unified management console. This unified management allows for ease of deployment and centralized control and is supported by, and reinforced with, real-time security updates.
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