The Analysts Aren’t Wrong About Check Point

Globes Online’s Shlomo Greenberg seems genuinely puzzled as to why Wall Street analysts and other market influencers do not see Check Point Software Technologies in a more favorable light.

He refers to Network World’s Richard Stiennon’s recent open letter to Check Point CEO Gil Shwed, which calls for big changes at the Internet-security company. The following excerpt gives you a taste of Stiennon’s larger argument, which includes recommendations that Check Point move its headquarters from Israel to the USA, put its software on appliances (perhaps through the acquisition of a hardware company), and focus and execute better on enterprise and carrier (hosted security services) opportunities:

I have been perplexed by Check Point’s actions, or rather lack of actions, for the last seven years. Do you not see that there are opportunities in network security that surpass the existing size of the market? Do you not understand that your current customers are less well protected from outside threats than they were when they first became your customers? Do you not see the warning signs when you lose your major accounts to competitors? Do you not watch the network security start up activity in Silicon Valley? Have you not noticed that Cisco is pulling off a marketing coup with its misbegotten Network Admission Control scheme?

However, instead of taking Stiennon’s criticisms seriously and rebutting them accordingly, Greenberg treats them as symptoms of "management-shareholder relations" problems at Check Point. He claims the management-shareholder relationships problems also are reflected in analysts’ concerns and questions about Check Point’s prospects.

Greenberg is wrong. Check Point has a performance problem, and it cannot be addressed by improved investor relations or by slicker public relations. For the most part, the market analysts and critics such as Stiennon are absolutely correct.

Check Point exhibits all the signs of a company that has no room for complacency. Overall revenue growth is slowing, software-license revenue is declining, channel conflicts are growing, and a coherent strategic direction is lacking.

No amount of spin doctoring will mask the numbers that Check Point has reported or will report in future quarters. Until those numbers improve, and until the company’s leadership can demonstrate that it has a firmer grip on reality, Check Point can expect its stock-market performance and real-world sales to go sideways.

2 responses to “The Analysts Aren’t Wrong About Check Point

  1. Either something was lost in the translation or you missed my thinking. I fully agree with Stiennon that Gil Shwed has a problem. All i am saying is that Checkpoint’s shareholders should speak, should wake Shwed up. This is the only way this capable person would understand and move things in the co.

  2. Shlomo,

    Thanks for your comment. I think I did miss your thinking, and I apologize.

    As for Shwed, I think shareholders are speaking to him with their money. He might not be listening. Part of the problem might be the composition of the board of directors, which perhaps does not represent shareholders’ interests as well as it should.

    Best Regards,
    Brad

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