Every couple of months you see headlines about a large financial institution, university or government agency that has exposed customer data to crooks due to a boneheaded security breach. We are all at risk as the convenience of storing credit card and identifying information with business and retail partners has blended into our lives.
Naturally, a thicket of compliance rules has emerged for entities that house customer data. And that has in turn led to a fast-growing cottage industry focused on blocking the bad guys.
One of the more interesting of the new group is Proofpoint (PFPT), which provides customers with cloud-based security solutions for email encryption, secure email archiving, instant messaging and the like -- all designed to protect sensitive data from theft and loss.
The company has been around nearly a decade, founded in Sunnyvale, Calif. in 2002 by Eric Hahn, the former chief technology officer for browser pioneer Netscape Communications. Gary Steele has served as chief executive since the beginning. He previously spent years at bigger firms like Hewlett-Packard (HPQ) and Sun. The young company has a great pedigree.
With an initial round of funding from venture capitalists, the company originally focused on the spam email filtering business. Although filtering is standard on every home and business email system in the world now, there was a time a decade ago when spam was one of the biggest concerns for business productivity.
The anti-spam crusader was forced to pivot and eventually morphed into a complete security and protection provider with four divisions: enterprise protection, privacy, email archive and Governance. The integrated Proofpoint platform now helps business keep malicious content out of their systems, prevent data theft, ensure proper email archiving for compliance purposes and maintain sensitive data that meets specific compliance needs.
The company's client list includes AON, Guaranty Bank, the U.S. Department of Agriculture, Outback Steakhouse and about 2,400 other customers in businesses that span every sector and geography.
Proofpoint provides its solutions in a security-as-a-service package that can be deployed from the firm's own datacenters or in customer-based cloud centers. This helps lower costs to its clients and allows Proofpoint to easily address system updates and upgrades without having to travel to client locations.
Revenues are based on a recurring revenue structure where clients contract to pay a subscription fee for the various components of Proofpoint's platform.
The firm's internal salesforce generates the bulk of its product revenues, but does utilize strategic partnerships with tech giants like IBM (IBM) and Microsoft (MSFT) to distribute its solutions as well. In addition to a 90% customer retention rate, it has nearly two dozen existing or pending patents in place.
The company competes with the likes of Cisco (CSCO), Google (GOOG) and Intel (INTC), who all made major acquisitions of smaller data security firms to enter this line of business. And Proofpoint is regularly mentioned as a potential merger partner for a larger entity.
Despite being around for a decade, shares only went public last month, debuting at $13 per share. They quickly rose and are now up 10%. The firm is not yet profitable, but revenues have doubled in the past six years, jumping from $38 million to more than $80 million from 2008 to 2011.
The Proofpoint executive team has done a good job of adapting its product lineup to meet the changing environment of corporate security and at under $500 million in market cap, presents a great chance to enter this booming sector with a high-growth company with a significant portfolio of clients. Put it on your shopping list to buy during a summer or autumn wipeout.