Government Wants More Cybersecurity, Private Sector Lagging? (FTNT, PANW, FIRE, CHKP, WBSN, VDSI, PFPT, LMT, RTN, SAI)

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After markets closed last night, Fortinet Inc. (NASDAQ: FTNT) issued a warning on earnings and revenues for the company’s first quarter. The announcement dragged down share prices at several other vendors of Internet security products which sell primarily to the private sector.

Shares of Palo Alto Networks Inc. (NYSE: PANW), Sourcefire Inc. (NASDAQ: FIRE), CheckPoint Systems Inc. (NASDAQ: CHKP), Websense Inc. (NASDAQ: WBSN), Vasco Data Security International Inc. (NASDAQ: VDSI), and Proofpoint Inc. (NASDAQ: PFPT) all opened lower or nearly flat this morning.

At the same time that Fortinet said its lowered expectations are partly due to “a few deal” that failed to close as expected, the Obama administration budget proposal to Congress seeks to boost spending on cybersecurity in the public sector by about $1 billion in fiscal year 2014, to more than $13 billion. In the Defense Department alone, an additional $800 million is proposed for cybersecurity operations.

Ironically, the largest providers of security systems to the Defense Department are traditional defense firms like Lockheed Martin Corp. (NYSE: LMT), Raytheon Co. (NYSE: RTN), and British-based BAE Systems Inc. These firms got a share price boost today, as did SAIC Inc. (NYSE: SAI).

Firms like Fortinet do sell to government agencies, although the sales are often made indirectly through another reseller or government contractor. In its Form 10-K for last year Fortinet said that it has had “limited traction” in sales to the U.S. federal government.

It seems obvious that Fortinet and the other primarily non-defense firms should begin to focus more on government sale since that appears to be where the money will be. Just sayin’.

Fortinet shares have been hit hard today, down more than 14% at $18.75 in a 52-week range of $17.53 to $28.23.