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Wednesday 07 November 2018

Subdued Sophos looks to FY20 for better results

Subdued Sophos looks to FY20 for better resultsSophos delivered another subdued period of growth for its first half, with its shares falling as much as 28% on the news before recovering slightly. Sales of its cyber security products and services in H119 were sluggish compared to last year, when revenue was buoyed by the WannaCry ransomware attacks that disrupted large numbers of public and private sector organisations across the world, including 81 NHS trusts.

While there was some growth for Sophos, it was marginal. The company’s H119 billings increased 3% yoy to US$353m, up 2% in constant currency, and in line with expectations outlined in July’s first quarter trading update. Those numbers however fell some way short of analyst expectations as billings growth slowed to 6% yoy (2% in constant currency), and Q219 appears to have fared no better.

Sophos’ H119 group revenue grew 18% to US$350m, but only after the H118 numbers were restated to accommodate new IFRS 15 reporting standards designed to harmonise how and when revenue from customer contracts is recognised. That contributed to pre-tax profit of US$26m compared to an equivalent loss of US$36m in H118.

Sophos chief executive officer Kris Hagerman pointed to a solid enterprise security portfolio as a foundation for better times ahead. The company’s flagship Intercept X with EDR and XG Firewall products are both set for major refreshes in the next few months which are expected to drive sales in FY20 (the company anticipates only modest improvement in H219).

We agree with Hagerman that the underlying demand for enterprise cyber security products and services will remain strong (see Cyber Security Market Trends and Forecasts to 2021). The trouble is that competition is intense and profits hard to come by as suppliers large and small (see our Cyber Security Supplier Ranking 2018 report) spend heavily on developing tools to combat a fast expanding threat landscape and ease the complexity of security management for hard pressed IT departments.

Posted by Martin Courtney at '08:48' - Tagged: results   cybersecurity   Sophos   H1  

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