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  • How Proofpoint, Inc. (PFPT) Will Benefit From Messaging Security Market 0 comments
    Feb 7, 2014 2:24 PM | about stocks: PFPT

    Proofpoint has been increasing its messaging security capabilities with strategic acquisitions. The company acquired Abaca Technologies and Armorize Technologies in mid-2013. These acquisitions enhanced the company's Targeted Attack Protection (NYSE:TAP) solutions by bringing in next-generation threat and malware-detection technologies. Continuing its expansion, Proofpoint acquired Sendmail Inc., a messaging technologies provider to enterprises, in the fourth quarter of last year.

    The acquisition gave Proofpoint ownership of "Sendmail Messaging Transfer Agent (MTA)" on which the company's Proofpoint Enterprise Protection™ solution is based. This will enable the company to optimize its Proofpoint Enterprise Protection™ solution further to meet the needs of cloud messaging architectures and security requirements. Sendmail is expected to add around $5 million to the revenue of Proofpoint in 2014. Apart from that, the acquisition will open Sendmail's customer base to Proofpoint's other message security solutions such as TAP. Proofpoint can cross-sell its security solutions to Sendmail customers which should increase the company's revenue in the coming quarters. The addition of new technology will also increase the competitiveness of the company in the message security market.

    Other players in the security market are also following this acquisition strategy. FireEye (NASDAQ:FEYE), a leader in advanced threat protection, has recently acquired Mandiant for $1 billion. Mandiant provides advanced endpoint security products and security-incident management solutions. The acquisition has enhanced the company's advanced threat-detection capabilities in email, web, content, and data center security platforms. FireEye has become a major competitor of Proofpoint in message security following Proofpoint's acquisition of Armorize Technologies. With FireEye's Mandiant acquisition, competition will intensify in the message security market.

    The SaaS message security market is expected to grow at a CAGR of 10.3% and reach $1.1 billion by 2017, from $667 million in 2012. Proofpoint's acquisitions in the last six months will help the company in this fast-growing message security market. Further, the company's strategy of acquiring smaller players may continue in the near term, as the company recently raised $201.25 million by issuing 1.25% convertible senior notes due in 2018. The company expects to use the proceeds on corporate functions, acquisitions, and other strategic transactions. This indicates that the company may continue its acquisition strategy in the near term to grow its customer base and acquire new technology to improve its competitiveness.

    Growth opportunity for archiving solutions

    Owing to the growing usage of social media by organizations, archiving social media communications has become an important part of managing corporate information risk. These organizations are also required to capture the content and store it for a certain time as mandated by regulatory bodies such as SEC and FINRA, which is driving the demand for archiving solutions. The major growth in the archiving solutions space is expected to be driven by cloud-based archiving solutions. It is expected that 60%-70% of archiving will be cloud-based. Proofpoint will benefit from this growth and is expanding its archiving solutions.

    Proofpoint's "Proofpoint Archiver for Chatter" will deliver archiving solutions to selectively capture conversations in salesforce communities. The selective capturing of communications from salesforce communities will help organizations store the data and content associated with these communications. This will help companies manage the information risk associated with social media in addition to complying with regulatory mandates. Furthermore, the market for archiving solutions is expected to have a CAGR of 7.8 % and reach $2.1 billion by 2017, with major growth from cloud-based archiving solutions. Proofpoint should benefit from this growth as the company specializes in only cloud-based archiving solutions.

    Conclusion

    Proofpoint reported revenue of $137.9 million for 2013, beating its earlier guidance of $132 million to $133 million. The company is poised for similar growth in the coming quarters. The acquisitions in 2013 will help the company to grow the SaaS messaging market. Also, the expansion of the company's archiving solutions will help it increase revenue with the growing archiving market.

    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: PFPT
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