Hacker Scare Again Boosts Security Stocks

[InfoSec News <isn () C4I ORG>]

http://www.internetstockreport.com/column/article/0,1785,1661_573961,00.html

by Chris Nerney

January 30, 2001 - Get ready for a run on Internet security stocks.
With two high-profile hacker-related scares making global headlines in
the past few days, investors can be expected to snap up shares of 'Net
security providers.

That's what happened nearly one year ago, when a series of "denial of
service" (DOS) attacks hit Yahoo and several other major Web sites. In
one day following news of last February's hacker activities, five
different Internet security stocks climbed more than 20%, with one
(WatchGuard Technologies) gaining 46%. Again, all in a single trading
session. (See Hacking And Trading, A Powerful Combination.)

Granted, last February was - literally and figuratively - a different
millennium for Internet stocks, which were still soaring as investors
remained blissfully unaware of the large bear lurking around the
corner.

But already, in the wake of Microsoft's widely publicized DOS outages
last week, 'Net security stocks are on the rise. In Monday's trading
alone, five different Internet security companies saw their shares
post double-digit gains. They are:


Ticker           Company                 %Gain

(NASDAQ:VONE)    V-One                    24.4
(NASDAQ:CYLK)    Cylink                   20.0
(NASDAQ:WGRD)    WatchGuard Technologies  13.2
(NASDAQ:ITRU)    InterTrust Technologies  11.6
(NASDAQ:PILT)    Pilot Network Services   10.7

And that could just be a warm-up for Tuesday, when many investors will
read for the first time that federal computer experts on Monday warned
that a "critical" flaw in commonly used software that runs Internet
directories could expose corporate and government Web sites to
crippling hacker attacks. (See Security Flaws Found in Popular DNS
Software.)

As I noted after last February's DOS incidents, the run-up on Internet
security stocks isn't particularly rational, since most investors have
no idea whether any of the companies above sell products or services
that effectively address the problem. It's about opportunism.

Another stock to watch on Tuesday is Akamai Technologies (NASDAQ:AKAM)
- and unlike the security stocks, this one makes sense because AKAM
runs a huge network of servers that help alleviate Internet traffic
jams, which are a common result of DOS attacks.

Akamai shares rose nearly 7% on Monday following news that Microsoft
has hired the Massachusetts company to run four of the eight servers
it uses for its domain-name server network. (See Akamai Shares Gain on
Microsoft Report.)

That's the kind of information that helps investors zero in on the
appropriate company. As the market absorbs Monday's federal warning
about the threat posed by flaws in the Berkeley Internet Name Domain
software, look for Akamai shares to get another boost.

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