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Check Point Software's (NASDAQ:CHKP) main problem is that it is plummeting, despite (1) presenting the best economic value in its history for investors, (2) on the basis of what’s known, being one the most economically worthwhile investments on the market, and (3) the fact that most investors are aware of all this.

I place the blame solely on the company management, which does not know how to sell itself to investors, and what’s worse, is unable to explain its vision to the analysts.

Cisco Corporation (Nasdaq: CSCO), Juniper Networks (Nasdaq: JNPR) and EMC Corporation (NYSE: EMC) are three mega Internet infrastructure companies that acquired security companies more or less like Check Point. Each of them carried out the acquisition at market values that were much higher than what Check Point currently offers investors.

Does the fact that the stock has been going down the way it has, and is traded at a consensus multiple of 12 for 2006 and 11 for 2007, mean that the takeover factor has not been taken into account here? Do you know what the multiples are of the other companies in this field that were recently acquired?

At the current price, if the management is not playing us for fools, there is money for the taking here, and the most amusing aspect is that Check Point has even lost the opportunity to acquire a company. Americans think differently from Israelis. They want more shares, and less cash. Can Check Point give out shares that are traded at multiples like these? Anyone who believes that Check Point is falling because of a slowdown in the security software market doesn’t know what he’s talking about.

Check Point’s problem vis-à-vis shareholders is beginning to take the form of two arrowheads. One of these is that Check Point’s management is losing the confidence of investors (and, leading on from that, also the confidence of analysts). The other is the emerging structure on Main Street, in which security has become part of a total infrastructure package.

CHKP 1-yr chart:


Published originally by Globes [online], Israel business news - www.globes.co.il
© Copyright of Globes Publisher Itonut (1983) Ltd. 2006. Republished on Seeking Alpha with full permission.

Source: Check Point Suffering From One Thing Only - Poor Investor Relations (CHKP)