'What's the alternative?' SolarWinds boosts security firms' bottom lines

By Paresh Dave OAKLAND, Calif.

Reuters December 25, 2020 00:07:03 IST
'What's the alternative?' SolarWinds boosts security firms' bottom lines

Whats the alternative SolarWinds boosts security firms bottom lines

By Paresh Dave

OAKLAND, Calif. (Reuters) - Cybersecurity providers including FireEye Inc and Microsoft Corp could not prevent a huge network breach disclosed this month by numerous U.S. agencies and companies, yet their shares are soaring for a second straight week.

The months-long penetration exposed weaknesses in security tools as well as network management programs, most notably SolarWinds Corp's Orion software widely used to oversee networks.

Recalls and scandals affecting products such as automobiles, food and toys tend to hurt shares across an industry, as investors brace for broad declines in consumer confidence and sales, according to two experts who have studied such scenarios.

But the spillover from the cybersecurity scare has been different. Wall Street is betting that governments and businesses - having invested years in moving to digital infrastructure - will only accelerate purchases of the latest IT tools.

"What's the alternative?" said Venkatesh Shankar, marketing professor at Texas A&M University.

Airbag recalls or Listeria outbreaks tend to affect shares within a narrow supply chain, from restaurants and auto dealers down to parts and ingredients suppliers, he said.

But "the magnitude of this breach is not just within the software industry," he said, noting SolarWinds' customers span countless industries.

Kartik Kalaignanam, a University of South Carolina marketing professor, said traders are expecting organizations will bolster their defenses even if it means purchasing services from companies that were hacked.

"Although one could argue each one of them has some sort of flaw in their system, there's a feeling there's going to be more spending happening, and the market will be pushed up overall," Kalaignanam said.

A BlackRock iShares fund of cybersecurity stocks surged nearly 10% last week and rose another 3.5% this week entering Thursday. FireEye rose this week to a 5-year high, Microsoft topped a 90-day peak and Palo Alto Networks, which said it blocked intrusions related to SolarWinds, jumped to an all-time record.

Mark Cash, who analyzes stocks for research firm Morningstar, said the SolarWinds breach "will certainly benefit" security companies. Once called in to repair defenses, they inevitably get a contract to stick around, Cash said.

Shankar and Kalaignanam said they expect industry shares to stay elevated for about six months to a year.

(Reporting by Paresh Dave; Editing by Cynthia Osterman)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.