Mobile Security Market Wobbles

Some mobile security firms appear to be feeling the effects of larger competitors getting into the market, as well as what may be the earliest shockwaves from major government austerity measures in the U.S.

Fortinet, which makes security appliances for service providers and the enterprise sector, saw its stock plunge 15 percent Wednesday after it issued a surprise profit warning. The company expects first-quarter revenues of $134 million to $136 million compared with the company’s previous guidance of $138 million to $141 million.

"Our financial results were negatively impacted by a few deals in the U.S. service provider segment which did not close as expected, macro factors in Latin America and EMEA, and, to a lesser extent, the timing of new appliance product releases and inventory shortages," said Ken Xie, CEO of Fortinet in a statement.

"We were pleased with the strong performance of the Asia Pacific region as well as traction in the U.S. enterprise sector during the first quarter," he added.

The warning could be an indicator of increased competition for the security technology vendor from larger telecom rivals, suggests Patrick Donegan, senior analyst at Heavy Reading.

"Fortinet's warning comes out of the blue," Donegan said. "They've been going like a train, including in the service provider space. With Ericsson now partnering with Palo Alto; Cisco revamping its strategy with Cognitive Security and Arbor Networks; and Juniper and NSN aligning more closely in the network security domain, the bar is certainly being raised in service provider security. That might have something to do with it. Or it might just be a blip. It’s too soon to tell, I would think." (See Security Vendors Set Sights on Mobile Operators.)

Fortinet is not the only mobile-security-focused firm feeling increased pressure in the market. On April 4, F5 Networks, a supplier of application delivery systems that has branched into security, warned that revenue for the quarter ending March 31 is expected to be $350.2 million, less than the company's forecasted $370 million to $380 million.

"From a market perspective, Telco bookings were down sharply on both a sequential and year-over-year basis," F5 CEO John McAdam said in a statement. "U.S. Federal sales were also down significantly from the second quarter a year ago."

The federal spending aspect is an ominous sign for any tech company with major government contracts. Across-the-board mandated budget cuts (the Sequester) took hold at the end of February.

By the end of September, $85 billion must be cut from government spending rolls. Spending on IT hardware is expected to be one of the easiest cuts for government departments to make as their budgets shrink.

Sequestration has already affected everything from travel budgets to the timing of the anti-terrorism trial of Osama Bin Laden’s son-in-law in New York City.

— Dan Jones, Site Editor, Light Reading Mobile