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Allot: THE INVESTMENT CASE
INVESTMENT OVERVIEW

Allot’s network intelligence skills enable service providers to step up their security game

Securing a network is a crucial task comprised of many moving parts. Allot knows how to help.
Allot employees standing by company display
INVESTMENT OVERVIEW: ALLT The Big Picture
Allot is a security and smart network intelligence solutions company

The song goes “money makes the world go ‘round,” but the same could be said for communication service providers, or CSPs. Every phone call, text message, Tweet, post and television show is made possible by the CSP running the show backstage.

It’s a full-time job for the telecommunications carriers, cable service providers, satellite broadcasting operators and cloud communications service providers sitting in the director's chair, making sure the show goes on without a hitch.

If the CSPs are the directors, then Allot Ltd (NASDAQ:ALLT) acts as a stagehand. The security and network intelligence solutions company waits in the wings monitoring the situation, securing the lights and rigging, laying the groundwork for a safe, show-stopping performance.

READ: Allot wins major contract from Dutch telecom giant KPN

Founded in 1996, the tech company got its start in deep packet inspection, a method of examining and managing network traffic. Backed up by more than two decades of experience, Allot has been making the transition from traditional Deep Packet Intelligence (DPI) to security and smart network intelligence.

CEO Erez Antebi, a 35-year industry veteran, has led several telecommunications companies, including Gilat Satellite Networks, Spacenet Rural and Clariton Network. Antebi also held positions with the Israeli Ministry of Defense.

The power of data

Network infrastructure is the backbone of a CSP, the foundation upon which a platform is built. To protect a network and utilize it to its fullest potential, you first need to understand it.

That’s where Allot comes in. Allot increases network visibility via real-time network monitoring, network analytics and smart data sources.

Network visibility is crucial because if you don’t know what’s going on with your network, it’s that much more difficult to control and secure it. Allot’s ClearSee Network Analytics product provides real-time data that can be translated into actionable business opportunities.

Allot's Secure Service Gateway product is designed to maximize network performance, monitor traffic, pinpoint problems and filter out potential security threats before they have an effect on service, lowering operating costs through a one-stop shop solution.

A one-stop shop

Nearly two-thirds of Americans have encountered some form of data theft and close to half believe their data are less secure than five years ago, according to surveys by the Pew Research Center. About 45% of consumers said they would be willing to pay a premium for security services, according to a Deloitte consumer survey.

Allot offers CSPs the toolkit to alleviate those concerns. With the help of Allot’s technology, consumers receive protection from their service provider for a monthly fee, lifting the burden of personal responsibility for protecting their devices.

“You don’t have to worry about it. You don’t have to download anything. You don’t have to try and figure out what’s better and what’s not better. Here’s a reputable company that’s providing you broadband access and now they’ll provide you a security service and that is so much easier,” explained Antebi to Proactive Investors.

In short, Allot provides value-added security-as-a-service to CSPs. In turn, those CSPs can more easily provide additional network security services to their customers.

Allot in action

The company recently teamed up with computer-security pioneer McAfee Inc and Spanish telecom giant Telefónica SA (NYSE:TEF) to help protect the fixed and mobile networks of smaller-scale businesses, extending the coverage to include device security.

Allot and McAfee combined their security products, Allot’s Network Secure and McAfee Multi Access, to protect users from network threats. The service includes antivirus protection and content filtering services.

READ: Allot Communications reaches deal with Swiftel Networks

"There is a current need in the market to offer an advanced protection service for the fixed and mobile network of companies,” said Jose Luis Gilperez, executive director public administrations, defense and security at Telefónica.

Telefónica, one of the world’s largest broadband and telecommunications providers, serves more than 343 million customers in Europe and Latin America.

“Telefonica can potentially achieve very high service penetration ratios for this premium security service,” said Hagay Katz, vice president cybersecurity at Allot.

Allot’s security services launched in Spain, Brazil, Peru and Argentina in the first half of 2018.

Making the switch

Allot has been shifting its focus as a long-time deep packet inspection company to security and network intelligence solutions.

The call to action came when Allot saw the size of the opportunity, forecasting that its addressable market could reach as high as $6 billion.

Growth in the DPI market is steady and Antebi stresses that the company is not neglecting its roots.

Allot’s decades of DPI experience is another arrow in its quiver as it competes in the growing network security market.

Eying near-term profits

Its most recent third-quarter results topped Wall Street estimates as the company reported a narrower-than-expected loss.

The company reported a net loss of $0.03 per share on revenue of $24.2 million, surpassing Wall Street estimates of a net loss of $0.05 per share on revenue of $23.69 million.

Allot expects full-year revenue between $93 million to $95 million, above its previous guidance of $91 million to $95 million.

It also surpassed analyst estimates in its second-quarter results, catching the attention of Oppenheimer analysts who reiterated a Perform rating with a positive bias.

“Allot continues to show steady execution building out its security business (sales and marketing efforts, pipeline build, product enhancements) and improving its execution in the visibility and control market,” wrote analyst George Iwanyc.

Going forward

In its recent quarterly results, the company forecast double-digit 2019 revenue growth with profitability on the horizon in the near future.

Allot expects to reach the break-even point or profitability by the second half of 2019.

While the company’s technology is used mainly in Europe and Latin America, Allot has been expanding its activities in the US and Asia Pacific in both the CSP and enterprise markets.

The need for network security in the US and beyond is increasing as quickly as the number of internet-connected devices in our lives.

As the internet becomes more and more ingrained in our daily lives, it spreads past the computers in our office and into the phone in our back pocket, the watch on our wrist and the smart fridge in our kitchen. Wherever there is an internet connection, there is data that needs protecting and Allot provides CSPs the ability to man the fort.

Contact Lenore Fedow at [email protected]

Follow her on Twitter: @LenoreMariee

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Allot employees standing by company display
November 20 2018
Securing a network is a crucial task comprised of many moving parts. Allot knows how to help.
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