Israeli cybersecurity company Check Point Software Technologies Ltd. (Nasdaq: CHKP) CEO Gil Shwed has warned about a bubble in the cybersecurity sector. He told “Bloomberg” that he won’t rush to acquire new startups, even though he has $4 billion in cash at his disposal.
Shwed was responding to investors and analysts who are urging him to be more aggressive in acquisitions and developing new products as Check Point’s share price, currently at $120.50, giving a market cap of $16 billion, has trod water over the past few years.
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According to PitchBook, cybersecurity startups have raised $17.7 billion so far this year, up 74% from all of 2020.
Shwed observed that the pace of growth in cybersecurity meant new firms were expanding at breakneck pace. He told “Bloomberg” defiantly, “It’s very hard to justify spending hundreds of millions of dollars on acquisitions that would marginally contribute to our $2.1 billion revenue.”
Shwed’s critics point to Palo Alto Networks, founded by Israeli CTO Nir Zuk, a former senior Check Point executive, and himself a frequent critic of Shwed’s cautious approach to acquisitions. Despite being founded several years after Check Point, Palo Alto Networks has a market cap of over $50 billion, making it worth three times as much as Check Point.
Palo Alto Networks has spent $1.6 billion on acquisitions in the last 18 months compared with just $270 million spent recently by Check Point on the acquisition of Israeli email security company Avanon. Check Point has reportedly also spent $100 million on developing cloud security products, “Bloomberg” noted. The company is also shifting new products to an SaaS model.
Shwed said, “It’s up to us to show to the market that the business model is changing and that it guarantees growth.”
Published by Globes, Israel business news – en.globes.co.il – on October 19, 2021.
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