Software January 18, 2010, 10:19PM EST

Symantec, McAfee, Checkpoint Await Spending Surge

Security software stocks are rising amid expectations that the U.S. government and businesses will spend more to protect against cyber intruders

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McAfee executive Mike Carpenter hasn't had much downtime at work since Jan. 12, when Web-search giant Google said its computers were hacked in China. "I've been in meetings from morning till night without breaks" since the news broke, says Carpenter, senior vice-president for McAfee's public sector business. "There's been tremendous interest" in the company's software, designed to protect computers from malware and security breaches.

The cyberattack against Google isn't the only source of interest in security software and the vendors that sell it. Shares of McAfee (MFE), Symantec (SYMC), and Checkpoint Software Technologies (CHKP) are getting a general lift amid signs that spending on information technology is rebounding after last year's slump. Investors expect businesses and government agencies to boost buying of computers and software.

One area that could benefit most is security software designed to guard machines and networks against cyber intruders. "Security will be a very good sector for 2010," says Daniel Ives, an analyst at FBR Capital Markets (FBCM). "Investors are viewing it as a positive investment theme for 2010 with Symantec, McAfee, and Checkpoint being front and center."

On Jan. 15, Symantec stock closed at 18.85, its highest since early October 2008. The same day, Checkpoint rose to 34.41, capping a 64% increase over the past year. (During the same period, the Nasdaq Composite Index climbed 51%.) McAfee stock has climbed 40% in the past 12 months and on Jan. 15 slipped 29¢, to 40.98.

"We have a target on our back"

Information technology spending may increase 3.2%, to $1.5 trillion, in 2010, after declining by nearly as much last year, according to market researcher IDC. Worldwide spending on security products and services is expected to grow by more than 9% annually from 2008 to 2013, to $37.8 billion, IDC says.

Government spending on computer security has been an area of particular strength for vendors. FBR's Ives expects "a significant increase in cybersecurity spending" by the government. "It's a multibillion-dollar market opportunity that's poised to show significant growth. We have a target on our back. It's a cyber war and we're fighting it. In order to fight it, you need to spend more money, and some of the core beneficiaries of that trend will be the security software companies. The engines are starting to roar."

The federal government's Comprehensive National Cybersecurity Initiative was begun under the George W. Bush Administration and continued by President Barack Obama. It will allocate billions of dollars a year to technology companies for security products and spans multiple government agencies, says McAfee's Carpenter. The Defense Dept. has also been a big buyer of security technology; McAfee on Nov. 10 announced a $9.7 million deal to supply the Air Force with security software consulting via a contract with Northrop Grumman (NOC).