Carson Block Short Proofpoint: Sohn London Presentation ~ market folly

Monday, December 7, 2015

Carson Block Short Proofpoint: Sohn London Presentation

We're posting up notes from the Sohn London Investment Conference 2015.  Next up is Carson Block of Muddy Waters who pitched a short of Proofpoint (PFPT).

Carson Block's Sohn London Presentation 2015

Short Proofpoint (NAS: PFPT) 

Proofpoint is priced for perfection. They went public in 2012. Block said that the more Proofpoint sells the more it loses. There is something wrong with the business model as they have had plenty of time to turn sales into profit.

Management mischaracterise their company as a cyber security company but it only focuses on email. Email security is a tiny market compared to cyber. Email security is a mature market. The number of business emails might actually be shrinking according to one analyst.

Management fudges the organic growth numbers. The real figure is much less than the market thinks.

Proofpoint is facing increasing competitive pressures. Microsoft, Google and Cisco are putting more effort into email security and are catching up. Proofpoint are losing some of their big accounts. Billing and revenue rates are flat lining. The growth rate is at risk. Proofpoint will not be able to maintain its premium pricing and there are already signs they are selling software at greater discounts. Many companies do not see email security as vitally important and are happy to use a free product that is good enough.

Be sure to check out the rest of the Sohn London Conference presentations.

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