A new cloud based security offering promises to reignite growth. The company's legacy systems typically are loaded into hardware devices that examine traffic at key network junctures. The new approach diverts all communications to a server farm on the cloud. Cyren rents a piece of the facility, allowing it to efficiently inspect every data packet that gets transmitted to and from its customers. Cyber threats are dynamic. New challenges emerge all the time. By channeling email and other data communications through a central checkpoint, Cyren can update its technology more quickly and comprehensively. Sending those updates to devices scattered around the world naturally takes longer. Many customers insist on doing the uploads themselves, moreover, which causes further delays. People have other things to do.
Cloud based security includes its own artificial intelligence. The technology identifies suspicious new elements and learns how to handle them. Cyren maintains a large group of experienced professionals, as well. That human knowledge usually helps the machine adapt more quickly. By having all the traffic go through a central location statistically significant conclusions can be achieved more rapidly than is possible with the older distributed strategy. Cyber criminals still can succeed with new tricks initially. But the combination of machine intelligence, human experience, and central control put the clamps on much more quickly, keeping the damage to a minimum.
Cyren focuses on small and mid-sized organizations. Large enterprises tend to rely more on broad based security providers, consultants, and internal experts. The company's legacy systems mainly protect on-premises communications. The new cloud offering covers them along with remote devices like cell phones and laptops. Every piece of data communication is checked in the cloud. Most competitors haven't switched to the cloud yet. Proofpoint ("PFPT") is the leader among those that have. The major security vendors still load special software on devices that leave the building, and guard key transmission points with custom hardware to protect on-site communications. Pricing is aggressive. Depending on the number of bells and whistles each employee generates $10-$20 in revenue per year, net to Cyren. The distributors the company sells through charge a mark-up on that.
Sales failed to take off in 2014 after the cloud version was introduced. Cyren attributes that mainly to its own marketing errors. Distributors weren't trained sufficiently. Marketing materials were inadequate. And there were technical problems when the software was deployed. Security software needs to be invisible and easy to use. Initial problems caused distributors to step back so as not to allienate their customers.
The basic technology was sound. Enhancements continued to be made. The marketing and implementation issues were resolved. A new push now is underway. Cyren has added a small number of direct sales people to focus on key accounts, moreover. Besides bolstering revenue, those transactions should serve as effective reference accounts for the distributor channel.
Sales to the legacy market remain fairly steady. Internet service providers in effect run their own private cloud. They can check for viruses with conventional techniques, because everything runs through their walls. Several other customers have well established routines, as well, and prefer to keep using what they have. Most small and mid-size organizations little or no security, though. Cyren offers a cheap and simple solution. Volume is likely to expand rapidly over the next several years as the spy-vs-spy battle on the Internet continues to unfold.
Our estimates assume a modest acceleration in 2015. Substantially faster gains are possible if the technology achieves widespread adoption. Things happen fast in today's computer industry. If Cyren catches a wave, exceptional returns are possible.
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