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Corero Network transition hits sales, CFO still upbeat

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Shifting its business over to the cloud has prompted cyber defence specialist Corero Network Security (LON:CNS) to warn results this year will be below market forecasts.

Sales have slowed due to growing numbers of small businesses buying cyber protection from their internet service providers and Cloud data centres. 

But just as the world of business is moving to the Cloud, so are those out to steal information, and, after a two year strategy re-think, Corero is now focused on offering protection to the service providers themselves.  

Earlier this year the firm launched its new family of SmartWall products, after seeing demand from the service provider market for distributed denial of service (DDoS) solutions.

DDoS attacks, where a target is flooded with data requests from multiple sources, are a widely used cyber weapon against government and corporate targets and can be costly in terms of lost revenues, brand damage, customer satisfaction and security operations.

Chief financial officer Andrew Miller describes 2014 as a year of transition for the business and he now expects full-year revenues of US$9mln and loss before interest, tax, depreciation and amortisation of $7mln. Shares fell 35% to 13p.

He is confident, nonetheless, that the new SmartWall product range will be a hit.

“In October we received a SmartWall order from a leading on-line gaming company, the company's largest DDoS defence deployment to date, alongside multiple other SmartWall orders in recent months and a growing number of SmartWall Proof of Concept customer trials in progress.

 “The continuing move to the Cloud, while impacting the growth of the previous generation product, and a heightened awareness of the importance of cybersecurity defences should be solid drivers of growth for Corero in 2015. 

“SmartWall deployments today are protecting customers from frequent DDoS attacks and providing real time network forensics to assure customers that their operations and online presence are secured against these threats. The strategic transition to SmartWall will drive revenue growth." 

Northland Capital Partners said it progress with the SmartWall product is reasonably encouraging and management is positioned for the next generation of DDoS mitigation.

The broker added: “Growth in DDoS attacks and the associated spend on mitigation products is unquestioned, whether CNS has the right products and sales and marketing infrastructure remains less clear.”

Quick facts: Corero Network Security PLC

Price: 4.58 GBX

AIM:CNS
Market: AIM
Market Cap: £22.66 m
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