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Corero Network Security (LON:CNS) has passed a ‘significant milestone’ in its development by getting a tier-one internet service provider to take its SmartWall Threat Defense System, which protects against cyber attack.
The identity of the new customer was not revealed; however, tier-one companies are generally the largest internet providers in a particular region and as such there are only a few of them around the world.
In our introductory article on Corero we said the real tick in the box for SmartWall would come when one of these giants put pen to paper, so the announcement is an important one for Corero.
Initially, the new customer is buying four SmartWall appliances for in-line real-time protection against distributed denial of service, or DDoS for short.
In very simple terms, DDoS attackers overwhelm their online target with traffic from multiple sources, knocking it out.
So, if you are a bank, for instance, a successful DDoS attack can result in costly downtime as well as drubbing a perhaps already tarnished reputation.
With the advent of Cloud computing, the number of targets has grown exponentially, while raids on networks are becoming more prevalent.
That frequency of attack means that companies require a fully automated service that updates and adapts almost in real time to keep up with threat, which is exactly what SmartWall offers.
SmartWall trials are also being conducted by several of the top 10 US internet service provider.
Chief executive Ashley Stephenson said of today’s news: "Corero's first tier-one ISP order is a significant milestone for the company and is further validation of the SmartWall TDS product.
“The service provider market for real-time and automatic DDoS mitigation solutions is growing fast, driven by the increasing demand from their customers for DDoS protection as a service, and we look forward to capitalising on this opportunity."
The shares, up 18% in the last month, added a further 5% in afternoon trade to change hands for 15.5p.
The business is now in commercial mode thanks to a £5mln fund-raise announced on July 30 that has equipped the company with the cash required to get Corero to break-even.
The story of the last few months has been one of steady progress, though pace appears to be picking up.
In September it won two orders of £450,000 recently, one from a US internet service provider, the other with a FTSE 100 company, and it also signed a partner deal with Verisign, the domain name and Internet security specialist.
The ‘dominant’ sales model currently is a perpetual licence fee with a recurring annuity element, though the industry is moving to the ‘right to use’ licensing, where the permission is renewed each year.
While the past month has seen the stock starting to tick back up from its lows it is fair to say the company’s £27mln market capitalisation doesn’t really reflect the potential of the product.
Validation from a tier-one service provider could give Corero a much-needed bump.
The market also needs to wake up to SmartWall’s potential.
If you have a pen, paper and calculator to hand then go do this short piece of financial maths.
Double the company’s current revenue base. Now, using the mean sales multiple for the cyber security sector, tot up how much Corero would be worth if it was listed in the US rather than on AIM.
The per-share valuation is quite startling and perhaps tells us what the business might be worth to a predator.