MSFT vs ZS, PANW, CRWD, NET

Investment Analysis Clubs Saul’s Investing Discussions
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https://www.investors.com/news/technology/msft-stock-cybersecurity-offerings-from-microsoft-pressure-zscaler-palo-alto/

We talked about this a while back. A lot of people felt MSFT was too far behind to worry about.

Snips…
Microsoft (MSFT) continues to pressure cybersecurity stocks with new products aimed at companies such as (those in the subject)…

…Microsoft’s entry into the computer security Secure Service Edge market, known as SSE, also is expected to impact other cybersecurity stocks, such as Palo Alto Networks, Cloudflare and startup Netskope, analysts say…

An analyst said their SSE capability is less strong than their endpoint security and there are not expected to be as competitive in the SSE space.

“The reaction to ZS stock appears overdone, especially when considering ZS’s near-exclusive focus on the enterprise segment.” (ZS down 6.5% today, I nibbled a bit)

MSFT expected to aim for SSE adoption by small and medium companies.

… “Instead, we see this as a bigger risk for vendors with SMB exposure, including Cloudflare and potentially Fortinet (FTNT).”…

They have may some progress by bundling to provide big discounts.

Microsoft Security Copilot, the platform uses a new AI assistant to manage threat detection. (rolled out earlier this year)

The software giant has told analysts that its security business now brings in $20 billion in annual revenue and is growing 33% each year. Microsoft bundles products at its Azure cloud computing business and Office 365 platform. (But R&D costs at $4B a year).

Many by base security from MS and overlay it with more mature products like ZS.

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“Officials immediately contacted Microsoft to find the source and vulnerability in their cloud service,” Hodge added.

Andy

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I’m paying a lot of attention to what AI and Copilot can do for Microsoft Enterprise offerings. Up to recently, Microsoft was well known for offering products that are inferior, but just good enough to get the job done. Then they bundle that with something else achieving a better cost-model for their customers, which buy more products that they need and become a hostage of the bundling, where the cost of each product alone is pretty unknown. They have been doing this for 30 years.
For security, “good enough” obviously too risky for large customers. Hence why large enterprises don’t think Microsoft first for security. But this could change with AI. To be seen.

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Thank you for posting this. Yesterday’s sell-off in cyber-security stocks had the feel of a FUDy over-reaction, but I don’t have a deep enough understanding of the technology and the market to be sure. So it’s useful to see an analyst supporting that view.

Today another analyst chimed in, also stressing that this move by Microsoft is unlikely to threaten ZS, PAN or NET:

"Needham analyst Alex Henderson reiterated Zscaler Inc with a Strong Buy and a $210 price target, believing that the company’s technology and position in the market make it a solid investment opportunity. Microsoft Corp’s announcement of ‘New Entra’ products in the Access Proxy market is seen as incremental and unlikely to shift the competitive landscape.

“Regarding feature and capability additions, Microsoft’s products lag behind Zscaler, Palo Alto Networks, and Cloudflare. Zscaler’s purpose-built access network offers superior security features compared to Microsoft’s Proxy, which lacks advanced capabilities.”

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