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  • Fortinet, Inc. (FTNT) Should Benefit From The Unified Threat Management Market 0 comments
    Jan 23, 2014 3:14 PM | about stocks: FTNT

    Fortinet is expanding its reach in small and medium-size businesses (SMBs) through unified threat management (UTM) services. On January 13, the company announced 12 new security products under its connected UTM platform. These products address the security concerns of retail stores, branch offices, and distributed enterprises. The products include UTM security appliances, wireless access points, WAN extenders, and Ethernet switches.

    The SMBs can benefit in several ways with the connected UTM. They connect and integrate Fortinet's UTM appliances with wireless access points, wireless WAN extender, and other switching products as well as simplify complex networks. As such, the connected UTM will enhance the enforcement of security policy, reduce costs associated with security, and offer high network security. Apart from that, Fortinet has introduced analytics capabilities into its Fortigate appliances to target retail businesses in which customer data and behavior is important. Retail analytics provide retailers with data-management solutions that help businesses monitor and analyze customer data. This will help retailers understand and influence customers, and in turn help the company attract retail companies to its products.

    With its connected UTM platform, Fortinet will increase its scope in the fast-growing UTM market. Moreover, the company will be able to further consolidate its position against competitors such as Check Point (NASDAQ:CHKP), which aggressively targeted SMBs last year. Over the past year, it introduced two UTM appliances - Check Point 1100 and Check Point 600 - aimed at branch offices and small businesses. UTM is the fastest growing segment in the security-appliance market and now comprises around 40% of the total market. It has grown 29.2% in the third quarter of 2013 compared to 2012. Further, the market is expected to grow at a CAGR of 15% over the next five years. Fortinet, with its dominance and increasing reach in the market, should benefit from the growth of the UTM market.

    Benefitting shareholders

    Last month, Fortinet's board of directors approved a $200 million share repurchase program. This repurchase program will be completed by December 31, 2014. The company for the first time announced a share buyback, which indicates that management considers shareholder value in line with the company's growth. This makes the stock attractive and instills confidence among investors after the company's stock had fallen by 9% in 2013.

    Fortinet had $841 million cash and investments on its balance sheet as of the third quarter of 2013, indicating sufficient liquidity for its share-repurchase program. Under the program, the company will be able to buy back around 5.6% of 168 million fully diluted shares at the current price of approximately $21. The company provided earnings guidance of $0.46 - $0.47 per share for fiscal-year 2013, and with the company's share buyback program, the company's EPS will increase considerably in 2014. It is encouraging for investors that management continues to have confidence in its earnings power and free cash flows for the coming quarters.

    Conclusion

    In 2013, Fortinet shares dropped by approximately 9%, compared to an overall market that rose more than 32%. The company's lower-than-expected performance in the first quarter combined with the sudden departure of the CFO, Ahmed Rubaie, were the primary reasons for the stock's under-performance. However, the company's stock has appreciated by more than 10% this year after the company named its new CFO, Andrew Del Matto. The company should continue its good run through the remainder of 2014. The increasing reach of the company in the fast-growing UTM market will help it increase revenue. Apart from that, the company's share repurchase program will increase the value of the stock in 2014.

    MissionIR provides investor relations services to publicly traded companies in exchange for compensation. This article may be part of our efforts to widen a client's exposure. To read our full disclaimer, visit http://disclaimer.missionir.com

    Stocks: FTNT
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