Morgan Stanley Comments On CheckPoint Software Technologies Following Management Meetings

After hosting meetings with CheckPoint Software Technologies CHKP CFO Tal Payne, Morgan Stanley came away more confident the blade opp. for CHKP still lies largely ahead and cons. rev. expectations over the next 2 yrs. are likely conservative. Penetration of the software blade architecture into the base is accelerating, a broadening solution set is increasing ASPs, and renewal rates on annuity blades are coming in higher than expected. A focus on annuity blades like IPS, Access Control, and DLP, contributing subscription revs., means the income statement benefits have still not been fully felt. Checkpoint Software Technologies feels very confident of the competitiveness of their current product portfolio given positive market feedback on IPS, App Control, Mobile Access, DLP and Identity Mgmt. In short, the consolidation story being driven by the Software Blade Architecture is working, and CHKP has strong products to meet the demand. At the same time, some of their biggest competitors from the networking world are struggling in the security market. Mgmt expects penetration of the software blade architecture to hit 90% of the active base within 2 to 2 1⁄2 years, up from 30% at the end of Q1. The near-term blade opp. is tilted strongly towards annuity blades being bundled with standard gateway configurations. Morgan Stanley has a $60 PT and Overweight rating on CHKP CHKP closed Monday at $54.97