Cyber security stocks rise after global 'ransomware' attack

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By Helen Reid

LONDON (Reuters) - A global "ransomware" attack disrupting factories, hospitals, shops and schools spurred investors on Monday to buy stocks expected to benefit from a pickup in cyber security spending by companies and government agencies.

The cyber attack began spreading across the globe on Fridayand by Monday had locked up computers in more than 150countries. European Union police agency Europol said on Monday the attack had hit 200,000 machines.

"These attacks help focus the minds of chief technologyofficers across corporations to make sure security protocols areup to date, and you often see bookings growth at cyber securitycompanies as a result," said Neil Campling, head of technologyresearch at Northern Trust.

Investors treated the attack as a buying opportunity for security stocks rather than a cause for concern over the risk it posed to companies, with the pan-European STOXX 600 index little changed and major U.S. indices up in midday trading.

In London, shares in cloud network security firm Sophos jumped more than 7 percent to a record high and security firm NCC Group rose 2.7 percent.

U.S.-listed shares in cyber security firms FireEye rose almost 8 percent, and peers Symantec and Palo Alto Networks were up more than 3 percent.

The attack would "refocus IT attention on updating security infrastructure and procedures" and benefit providers in email, network, and endpoint security, analysts at Wedbush wrote in a research report, highlighting Proofpoint and Splunk as stocks to watch. Proofpoint shares jumped more than 8 percent.

Analysts at Bernstein said desktop virtualization vendors Citrix Systems and VMware could indirectly benefit from the upgrade cycle, while defense companies Raytheon and BAE Systems should similarly get a boost in their commercial cyber security businesses. Government spending on computer security should also help General Dynamics, Lockheed Martin and Northrop Grumman, Bernstein said.

Companies' spending on cyber security protection is set toincrease 10 percent in Britain and Europe by 2020, according toBrian Lord, a managing director of cyber and technology atcyber security firm PGI, as outdated IT systems get a refresh.

"In many companies there's been an increase in investment inIT but not in the security that sits around it, so thisinvestment is likely to play a bit of catch-up," said Lord, whospent 21 years at UK government intelligence service GCHQ.

The risks of security breaches, particularly when theyresult in the leak of sensitive customer data, has in the past had a direct impact on share prices as investor confidence is shaken.

"Reducing the cost of security breaches by only 10 percentcan save global enterprises $17 billion annually," MorganStanley said in a report published on Monday.

The U.S. broker upgraded its rating on networking equipmentgiant Cisco Systems to "overweight." Cisco shares were up 2.6 percent.

With few pure-play, publicly traded software and networksecurity companies in Europe, a London-listed cyber securityexchange-traded fund (ETF), whose holdings include Cisco and FireEye, was in demand, up 3.4 percent.

In Helsinki, Finnish digital security firm F-Secure jumped as much as 5.1 percent to a 16-year high.

(Additional reporting by Danilo Masoni and Megan Davies; Editing by Vikram Subhedar, John Stonestreet and Bill Rigby)