A feature of the COVID-19 fallout is that the virus has left a trail of winners & losers across different sectors.

At Stockhead, we’ve spoken to executives across a number of sectors — including fintech and online learning — to learn about how they’ve adapted to such a sharp change.

And this week, we caught up with leaders from four companies in the cybersecurity space — a sector that’s been responding fast to updated client engagements, as workforces across the country pivot en masse to remote working solutions.

A common theme that emerges across sectors is that some operations and revenue streams have slowed, but the crisis has thrown up unexpected opportunities to capitalise in other areas.

Cybersecurity is a $183bn opportunity and these are the stocks tapping into it


Listed players

For Julian Challingsworth, CEO at ASX-listed Tesserent (ASX:TNT), the latest view from the ground is that clients are moving from a focus on safety to functional operations.

Tesserent listed on the ASX last year and provides security monitoring services for companies such as Toyota, The Good guys and Nintendo.

“I think for the first few weeks of this, everyone was happy having their staff safe and working from home,” Challingsworth told Stockhead.

“Now that’s been done, they’re turning their minds to — OK, we’ve still got a legal responsibility to manage data, protect data and work from home efficiently.

“So there’s been a big uptick in supporting organisations to set up normal office procedures around that work-from-home environment. You need the same security rules and principles applied to remote workers now, and that’s giving us a lot of opportunity.”

Tesserent’s share price benefited from some positive news flow last week, where it pointed to “minimal negative impact” in the March quarter and highlighted $5m of new contract wins.

Listed cybersecurity firm Netlinkz (ASX:NET) also caught the market’s attention recently, when it reiterated full-year revenue guidance in mid-April.

Netlinkz has a China focus for its secure-networking technology, where it’s recently entered the market via joint-venture and acquisition. Speaking with Stockhead, CEO James Tsiolis said the advanced COVID-19 timeline in China meant the last six weeks had been “almost like business as usual”.

“We saw things slow down in China back in February and early March, but once they adjusted there was still a lot of activity despite (those complications),” he said.

Tsiolis said that with entire organisations working remotely, client demand was focused on two key areas: speed and security.

“If you’ve got two staff working remotely who are communicating directly without having to go back to a central server, that’s where all the compromise is created,” he said.

“So the main issues for everyone are — how do you operate from home if you’re using your wifi that only has a certain bandwidth? And the second thing is how do you communicate securely? Those two things are what make our play so relevant.”

Tsiolis said Netlinkz was collaborating with Chinese majors such as JD.com and Alibaba as well as the Beijing municipal government, in order to “develop alternative ways that people can work remotely and securely”.

Challingsworth said the main challenge was to give clients “a real sense they can work from anywhere, but with the same level of security”. To achieve that, he highlighted the company’s partnership with NYSE-listed Palo Alto Networks, which specialises in advanced firewall products.

Via that partnership, the company deploys “virtual firewalls” which “effectively copy the office firewall to their home network, so employees at home have the same level of security from anywhere they are”.

“I was in a meeting with about a dozen CIOs recently, and their view was that it’s not acceptable to use somebody’s domestic internet service when we’re asking them to work on, say, advanced engineering projects,” he said.

“These are roles that need proper bandwidth, and you also need to manage security and performance. And that’s where we see a lot of opportunities for our service.”


Private competitors

In the unlisted cybersecurity space, Stockhead also caught up this week with Rob van Es, vice president at Illumio Asia-Pacific.

The company provides security-segmentation of data centres for large domestic clients, including airlines and big banks

And similar to the listed players, van Es said that while major clients had put some projects on hold, the move to remote working was creating a new pipeline of workflow.

“People working remotely presents a whole bunch of new risks. Instead of one secure VPN you’ve got thousands of households across an organisation that are all now a potential attack surface,” he said.

“Large companies are realising that and they’re hiring us to help them secure their networks, so it’s created a whole category of new opportunities.”

Andrew Campbell, from data science and cybersecurity education platform the Institute of Data, said he’s also noticed a shift in demand.

“I think the best piece of evidence to show that shifting mindset is we’re starting to see growth in new customer bases that weren’t there before,” he told Stockhead.

“We’re getting industry-qualified accountants with 10+ years experience wanting to transition into data science or cybersecurity. They’re in business every day now looking at accounting and transaction data, and they know they need the skills to get into a database and understand it to solve business problems.”


Just a trend, or paradigm shift?

While the enthusiasm levels varied slightly, all the experts we spoke to indicated that the effect of COVID-19 would leave at least some kind of permanent shift in how companies managed remote working and cyber security.

“It’s perhaps not revolutionary but maybe a bit of a new normal,” Challingsworth said.

“Now we’ve reached a phase of ‘this (work from home) could go on for a while, and it’s actually not too bad’ the key question is — how do we operationalise and keep the same level of corporate security across a really distributed network?”

Tsiolis was more definitive, arguing that the shift is “structural” and “here to stay”.

“It’s not cyclical – for lots of people you can get a lot done working from home while saving time on a commute, and using tech to do your work effectively,” he said.

“I think this event (COVID-19) will bring more R&D into the space to improve the tech. The goal is to resolve security and latency issues, and data transmission — making sure it’s done and stored consistently.”

Campbell agreed that it’s been a “pretty seismic shift. I think we’re seeing with COVID-19 there’s sort of been a step change. The volume of data isn’t just increasing, it’s taken a quantum leap and because of that, cybersecurity and data science demand has increased”, he said.

“There’s two things that are critical for every business; are you protecting your data, and are you using it to achieve competitive advantage? If you’re not thinking about those two things every day, other businesses will push ahead and beat you in the market.”