Sees IT Security as Key Market in PRC's IT Industry But Cautions Vendors of Highly Competitive Landscape

China

IDC: PRC IT security market produced revenues of US$265 million in 2004, growing 31.2% over 2003. IDC forecasts the market will achieve a high compound annual growth rate (CAGR) of 28.3% over the next four years, reaching US$921.4 million in 2009. Both domestic and foreign investors are strongly drawn to the IT security market, making it one of the shining stars in the PRC IT industry. Investment, financing, and merger & acquisition deals frequently occurred in the IT security market in 2004 as both domestic and foreign capital showed intense interest. Major M&A deals included Juniper's takeover of Netscreen, Symantec's acquisition of Veritas, Topsec winning the second-round financing of SoftBank, and Infosec's split off from Lenovo. Through capital operations, IT security vendors hope to benefit from attaining adequate cash flow, broader product lines, stronger brands, and greater channel capacity. As the capital market tends to endorse winners and abandon losers, out-performing vendors usually receive more attention. As a result, the trend of "the strong get stronger and the weak get weaker" will become more apparent in the PRC IT security market. Hence, the number of players in the market will decrease further.Despite the sustained growth of the PRC IT security market, competition continues to heat up. Vendors should be even more cautious in planning their next steps to compete more effectively.China Semiannual IT Security Market Analysis, 2H04 Publ 20050520