With Record Revenues, AXENT Puts Down a Solid Fist

With Record Revenues, AXENT Puts Down a Solid Fist
L. Taylor - July 6, 2000

Vendor Genesis

Rockville, Maryland based AXENT Technologies Inc. has been seeing steady increases in revenue and solid sales in its line of security products for the last several years. Growing at a rate of 45% in 1998, AXENT exceeded $100 million in revenue. In 1999, their total net revenue exceeded $112 million. AXENT develops, licenses, markets, and supports, computer security systems for enterprise computing environments. Its objective is to become the leading developer and provider of information security solutions for enterprise computing environments.

AXENT was founded in 1994, and filed its S-1 with the Securities and Exchange Commission (SEC) on April 22, 1996 issuing 2,000,000 shares of common stock. John Becker, chairman and CEO and Richard Lefebre, former chairman, are the co-founders of the company. AXENT was started as a spin-off, and distributor, of Raxco Software Inc. a systems resource management tools company. Both founders previously worked as VPs for Raxco and John Becker still serves on Raxco's board.

AXENT has made numerous acquisitions that have added to their fast growth story:

  • AssureNet Pathways, Inc. - 1997

  • Secure Network Consulting - 1998

  • Raptor Inc. - February 1998

  • PassGo - March 1999

Originally Enterprise Security Manager (ESM) was AXENT's flagship product. However, since the acquisition of Raptor, their Raptor firewall is the product that is more renown in the industry.

Vendor Strategy and Trajectory

AXENT will continue to expand its security product line, acquiring smaller security players along the way. With an approach to security called Security Lifecycle, Axent has put into place the proper roadmap for selling security products and services. Starting out with the assessment phase, the Security Lifecycle methodology uses Enterprise Security Manager and Netrecon to evaluate the present state of a customer's security status.

AXENT's three protection products, Intruder Alert, Raptor Firewall, and NetProwler contain the most fundamental security protection products that any aspiring Internet company should include in their IT strategy - network based intrusion detection, host based intrusion detection, and an enterprise hybrid firewall. Cybercrime and information security attacks are not going to go away. In fact, they stand to increase and become much worse, as more products with security holes in them get released to the market.

By far, AXENT's Raptor firewall is the leading revenue generator of their security protection line of products. AXENT obtained the Raptor firewall after purchasing Raptor in February 1998. The Raptor firewall was originally called the Raptor Eagle firewall before AXENT acquired Raptor. Raptor started out as what is known as a proxy firewall, and has since employed stateful packet inspection capabilities to become what is now known as a hybrid firewall.

Figure 1. Security Lifecycle


Vendor Strengths

From a technology perspective, AXENT is rock solid. Its Lifecycle Security Model, which takes into account the four critical aspects of security - Assess, Protect, Enable, Manage - provides a security roadmap that makes a lot of sense, and it has the products to support this process. AXENT's strength is its focus on doing one thing well - information security development and consultation. With so much interest in the security market these days, security is a growing niche within many organizations. AXENT's strength is its breadth and depth of solutions. Further, for AXENT, security is their core competency and main focus.

AXENT's acquisition of Secure Network Consulting (SNCi) in 1998 positions them with a consulting force that is trained on AXENT products, and has expertise in analyzing and determining customer security requirements. SNCi provides standard consulting services, Express Packaged Services, and ServiceShield Managed Services. SNCi is headquartered in San Antonio, Texas and has offices in Europe, the Middle East, and Africa.

Vendor Challenges

Though AXENT has a great story to tell as far as security is concerned, it is going to be hard for them to topple Checkpoint in the firewall market. Checkpoint currently dominates the firewall market, and has carved a rock solid niche. Checkpoint's Firewall-1 firewall started out as a Stateful Packet Inspection firewall, however, they have recently started adding proxies migrating it to a hybrid firewall. Stateful Packet Inspection firewalls typically have shorter development cycles, and are able to get to market faster. One key difference between Checkpoint and AXENT is that Checkpoint focuses only on the firewall and VPN market, where AXENT focuses on a much broader scope of security products that covers their entire Security Lifecycle approach.

Network Associates (NAI) is the vendor most closely positioned to grab some of AXENT's marketshare. Like AXENT, NAI focuses on a broad scope of security products which covers the entire spectrum of the security market. However, NAI's Gauntlet firewall, cannot compete with Raptor which is far more robust with more cutting-edge features. As it exists today, Gauntlet is not HTTP1.1 compliant. Because of this, an organization with a Gauntlet firewall will be unable to get to many financial sites. Further, Gauntlet is susceptible to many buffer overflow exploits and Denial of Service attacks as NAI has done little to keep the code patched and current. It should be noted that NAI's focus and vision is closely competitive with AXENT's.

Unlike NAI, AXENT does not have any PKI products. As e-commerce picks up speed, and more financial transactions start being done via the Internet, AXENT will not be able to grab new customers that have PKI on the top of their security requirements.


Vendor Predictions

AXENT will continue to expand its security product line, acquiring smaller security players along the way. Its focused approach to security and quality of security engineering, will keep it afloat in the rapidly burgeoning security market. Because the firewall market is seeing more and more interest in hybrid firewalls, and because it takes much longer to ramp up on proxy development than stateful packet inspection development, AXENT is well positioned to take away a bit more of Checkpoint's market share. Now that AXENT is marketing its firewall as a hybrid firewall, it will not be subject to the religious wars that stateful packet inspection vendors have been pitting against proxy vendors.

By making use of its IP, TCP, and UDP Generic Service Parsers, Raptor can support numerous multi-media protocols. In great shape to secure the streaming capabilities of the Internet, the multi-media protocols that can be supported by Raptor include:

  • H.323 (VOIP)

  • Microsoft Conferencing

  • Netscape CoolTalk

  • Read Audio

  • VDO Live

  • Apple QuickTime

  • Xing Streamworks

  • Emotion Creative Partner

  • WhitePine CU-SeeMe

  • Vxtreme WebTheater

Raptor's resiliency to Internet attacks makes it ideal for e-commerce and transaction processing. We expect to see Raptor's marketshare increase in this vertical market. Attacks that Raptor is resilient to include:

  • MS Exchange buffer overflow

  • Netscape mail server buffer overflow

  • BackOrifice

  • Smurf

  • SynFloods

  • Teardrop2

  • Named/BIND ("ADMrocks") buffer overflows

  • HELO buffer overflow

  • SMTP header buffer overflow

  • MIME header buffer overflow

In order to compete against NAI, we expect AXENT to acquire a PKI vendor to round out the Raptor product line.

Vendor Recommendations

AXENT needs to drive home an ace marketing plan in order to get the mileage out of its technology that it deserves. It is the firewall vendor best positioned from a technology perspective to give Checkpoint a run for the money. Partnering with network vendors like Cisco and Nortel Networks, as well as ASPs and ISPs, will help AXENT get better exposure in the security market. It is positioned well to protect streaming capabilities, and should work on forming alliances with streaming vendors.

In order to maximize profits, AXENT needs to manage its operational expenses better, aligning its growth more closely with the growth of revenue. In 1999, AXENT's sales and marketing expenses increased 49% over the previous year. As well, the cost of net revenues, which includes things like media, product packaging, documentation, and production costs increased by 72%.

Long-term, AXENT will be around for the foreseeable future.

User Recommendations

If you are looking for a company to provide a one-stop-shopping solution for your information security needs, AXENT is a safe bet. They have a full line of network security products, and consultants who can help implement them. The only other large-scale one-stop-shopping security vendor, Network Associates (NAI), is still trying to recover from a tarnished reputation incurred a few years ago due to revenue fraud. Compared to Raptor, NAI's Gauntlet firewall is sorely lacking.

Figure 2. AXENT's Net Income (Loss) over the last five years.

AXENT's 1997 loss was due to a one-time charge resulting from their acquisition of AssureNet. Excluding this one-time charge, AXENT would have had a profit of $12 million. The 1999 loss is a result of a growth in operating expenses. The growth of operating expenses exceeded the growth of revenue.

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