-McMafia, by Misha Glenny
Symantec (SYMC) and McAfee (MFE) are software companies known best by consumers for their antivirus packages. Symantec is the market leader in almost every segment it operates in, whereas McAfee is generally number two. Partly due to recent strong revenue growth and partly due to an aggressive marketing strategy to get its software installed on computers by the original equipment manufacturer, McAfee shares are trading at about twice the earnings multiple of Symantec. Given that Symantec has historically outperformed McAfee, McAfee’s strategy is risky, and the current valuation implies that McAfee will outperform even beyond the horizon visible to analysts, I see an interesting long/short opportunity.
Overview of Thesis
SYMC and MFE are nearly identical companies with the primary difference being that Symantec is larger and involved in data storage, management, and backup. The key short-term strategic difference is in growth strategy. A few years ago, SYMC seemingly choked on the acquisition of Veritas, a large data storage and management company, but they have since been able to integrate Veritas into a coherent Symantec. During this integration process, McAfee has been able to gain market share by bundling software into easily used suites for consumers and small businesses, a trend SYMC missed in 2006. MFE is now attempting to steal market share from SYMC by entering into agreements to have a free-trial of MFE software pre-installed on PCs. While management and many analysts are optimistic that this will produce strong results, the long-term benefits are limited. The average user that pays for antivirus software after a free-trial period remains a customer for approximately three years. If SYMC decides they are loosing valuable market share to MFE’s OEM strategy, they can simply compete by offering OEM’s an equal or better deal than that offered by MFE. Oligopolies naturally form for a reason, and number two players generally don’t have much success waging turf wars against the number one players by spending more money on distribution. MFE doesn’t have any sort of a long-term competitive advantage with the OEM strategy. However, SYMC has an established data storage and management business that offers something unique to customers and will take a while for competitors such as MFE to duplicate.
Analysts’ forecasts for revenue growth from 2008 to 2010, according to Bloomberg, are 29% for MFE (65% earnings growth), and 4% for SYMC (22% earnings growth). This leaves MFE trading at 23x 2010 earnings, compared to 14x 2010 earnings for SYMC, indicating that either McAfee will outperform well beyond the horizon visible to analysts or they will grow earnings by more than 65% over the next two years and maintain it.
Product Offerings and Market Share
Both Symantec and McAfee have a very broad lineup of security products. A list of the more important offerings is listed below with 2007 market share data, but the table is by no means complete. New products are coming out all the time, and there are many other products that may be important which aren’t listed. This table is just meant to demonstrate the breadth of each company’s product line. It is compiled from data from company websites and analyst research reports from BoA/ML and JMP Securities:
This table shows that SYMC has a dominant market position across the board. What Symantec has given up in market share, McAfee hasn’t necessarily gained, and SYMC has branched out into backup and storage, investments that are now bearing fruit.
One other interesting segment that wasn’t mentioned above is “data loss prevention”. According to reports from Kash Rangan at BoA/ML, the DLP market was only $200 million in 2007, but it is expected to grow to $1.7 billion by 2011. Symantec holds a market leading position with 58% market share. McAfee does have competing products, but market share is estimated to be less than 15%. I’m pointing this out because data loss was recently featured in the news when an analyst from Goldman Sachs stole some very valuable computer code.
Analyzing the quality of these products across the board is difficult for industry outsiders to do, compounded by the fact that the market is constantly evolving. For this reason, I’ll defer to the expert opinions. PC Magazine gave 4.5/5 stars to Norton 360 and Norton Internet Security 2009, rivaled only by ZoneAlarm Extreme Security from CheckPoint Software (also publicly traded, CHKP). McAfee Total Protection 2009 only received 2.5 stars. However, it should be noted that user reviews disagree. Both Norton products received 3.5 stars, compared to 4 starts for McAfee. The reviews read:
Norton 360: Symantec continues to offer security in two flavors, Norton Internet Security 2009 and Norton 360 version 3.0. This version of Norton 360 received the same rebuild from the ground up that Norton 2009 got last year, so its impact on performance is way down. In fact it had the least system drag of any tested suite in two categories despite the fact that it added some significant new abilities across many different components. For the most part, Norton 360 does its work in the background without hassling the user—I like that. Its parental control and antispam components are still weak, but an offer to install Norton Online Family (beta) in place of the regular parental control suggests that this will improve soon. My evaluation was marred by some seriously questionable practices on the part of Symantec's chat-based tech support; Symantec is in the process of addressing this problem. Nonetheless, we chose to award the security suite an Editors' Choice based on the merits of the software itself, because it's an otherwise excellent product.
Norton Internet Security 2009: This is definitely the slimmest, most unobtrusive Norton ever. Its protection is top-notch where it counts, though antispam and parental controls are still weak. As the best all-around security suite to date (I'll be installing it myself), it's our new Editors' Choice.
McAfee Total Protection 2009: McAfee's latest suite has improved malware detection, and its spam filter is also much better. But its overabundance of features hasn't changed at all; its UI is sluggish; and it saps system performance.
SC Magazine is an industry trade journal “for IT security professionals”. For the 2009 awards, Symantec won Best Anti-malware Solution with Symantec Endpoint Protection, while McAfee won Best Endpoint Security Solution with McAfee Total Protection, best Email security solution with Email Gateway, and the award for Best Security Company. More surprising than the awards won by each company is the number of awards won by small players with point solutions. It certainly seems like a space where smaller competitors frequently enter the scene with differentiated product offerings, potentially making an acquisition strategy viable if integration is carefully managed.
Manufacturer Product Rating Price Date
Symantec Brightmail Gateway 5 stars $995 3/1/2009
Symantec Vontu 4 stars $25,000 10/28/2008
Symantec Endpoint Protection 4 stars $52 9/4/08
Symantec Enterprise Firewall/VPN 5 stars $2,999 5/1/2003
Symantec Client Security 5 stars $70 5/1/2003
McAfee Vulnerability Manager 5 stars $16,820 5/1/2009
McAfee Email Security 4 stars $3,995 1/7/2009
McAfee Secure Firewall 5 stars $1,900-70k 1/7/2009
McAfee Internet Gateway 4 stars $2,395 3/9/08
McAfee DLP Appliance 5 stars $35,000 11/1/07
Looking through about 25 other reviews, I only found one product with a 3-star rating. So it looks like SC Magazine generally doesn’t give bad reviews.
Gartner provides the most in-dept analysis with Magic Quadrant reports, many of which can be found on the Symantec website. If you really want to understand the competitive landscape, these reports are required reading.
To sum it up, both Symantec and McAfee offer competitive products with high user satisfaction. Neither company has a clear technological edge, and even if they did, this is a market that evolves rapidly, leaving a company with at most three years to capitalize on a technical advantage. For the past few years, McAfee has capitalized on more attractively bundled products in the consumer and especially in the small business space. But it looks like that gap has been closed. SYMC has a larger market share to leverage costs across. They should be able to earn better margins or discount their goods. I’ll be showing through the rest of this analysis how Symantec has financially outperformed McAfee, how Symantec’s strategy moving forward is superior, and how McAfee is priced as though it will outperform well beyond a time-frame within which analysts have any ability to forecast.
Management & Strategy
SYMC and MFE are both heavily followed by the sell-side, and neither management team is shy about going on record. Once you’re familiar with what these companies do, there is an enormous amount of information available explaining each company’s strategy for the future.
Despite the product similarities, these companies have very different growth strategies. McAfee is focused on growing revenue through acquisitions and an aggressive OEM partnership strategy while Symantec is focused on growing profitability through internal R&D and better integration of the numerous acquisitions from the last few years. Following are some quotes from management that support the above statements. First are three separate quotes from Salem describing Symantec’s strategy:
1) And as I think about it, our goal absolutely has to be, how do we help our customers to secure and manage their information while helping them to drive cost out of their infrastructure, basically, helping them to commoditize their infrastructure. That message, that concept of helping them eliminate costs today, is absolutely resonating with our customers.
2) There are two metrics that my team is very focused on. One is the Net Promoter Score, so customer loyalty and you'll hear some of the presentations will cover that. And I think that's one metric that we look at. And the second is market share
3) Now one of the things that we've been looking at as a team is, I mentioned that we've done a lot of acquisitions over the year, but I want to focus us on more internal innovation. We have 5,000 engineers at our company, and I think it's a tremendous opportunity for us to do more with that incredible resource.
-Enrique Salem, Symantec CEO, Symantec Analyst Day
And two quotes from MFE describing their strategy:
I think we think of ourselves as growth company and not a value company. And so we're very sensitive that, right now-- last quarter, we grew revenues 20%-plus, as well as bookings 20%-plus. We think we have those kinds of opportunities still to harvest, and I think we try to balance between growing the operating margin percentage against the revenue growth opportunities and not sacrificing, necessarily, the investments that give us the strategic ability to sustain a growth profile versus tactically expanding the operating margin.
-Rocky Pimentel, McAfee CFO, JP Morgan Telecom Conference
McAfee's technology leadership has been acknowledged by industry analysts and publications. Most recently we re-received SC magazine's Excellence Award for best security company, best end point security solution and best e-mail security solution. We recognize in an open approach and partner ecosystem will create incremental value for our customers, partners and shareholders. We believe security will ultimately become ubiquitous. To take advantage of that opportunity we deliberately executed on a strategy that will extend our reach. Our partner ecosystem now includes more than 12,000 resellers worldwide, 60 plus security innovation alliance partners or ISVs which are committed to helping customers drive operational savings with McAfee compatible products, nearly 50 OEM partners which license, bundle and extend McAfee's reach to a broader user base and more than 200 brand name consumer partners driving global distribution.
Obviously our approach has been distribution, distribution, distribution. I called out specifically on the script just to give you a profile of what our strategy has been now having 50 plus OEM providers, 60 plus integrations to our technology through other security companies being our SIA partnership, 12,000 channel partners, over 200 consumer partnerships, and now we are starting to see the bigger, larger platform companies entertain distribution of McAfee's products.
-Dave DeWalt, McAfee CEO, Conference Call
Here is Symantec’s response in terms of technological leadership:
Technology leadership. First off, we have over 110 awards to date and counting for the Norton 2009 products and because Norton 360 just released a few months ago the awards have not completely rolled in. So, this number is getting much higher. This is in 31 countries around the globe and this is an amazing statistic; more rewards than we've ever won in the history of Norton products.
And, in fact, if you compare it to any of our competitors, competitors that we're much bigger than, you'll find that the closest competitor, all we can find is maybe as many awards as you can put on one hand; this is meaningful. The folks that do these reviews do tests -- and their very serious, their reputation's on the line. So, this matters. When these folks are in your camp and they're telling mass audiences about how great your products are that does translate into sales.
-Janice Chaffin, Symantec Consumer Group Manager, Symantec Analyst Day
Symantec’s response to M&A:
I think from a usage of cash for M&A, I think the point right now is, we will continue to do some amount of M&A. We'll look to use cash, but in the short term we're going to be patient. While we're prospecting a number of deals, we're not going to be overly aggressive right now.
We think that we've got a bigger opportunity to focus on integrating what we've got, and while we will do some M&A and we will use cash, we're probably going to be a little bit more careful with our use of our cash, and also look for deals that have meaningful financial benefit to the Company, so that means, look for things that are consolidating in the spaces that we currently are in, instead of looking to broaden the portfolio.
-Enrique Salem, Symantec CEO, Symantec Analyst Day
And Symantec’s response to partnership strategy:
Despite the market's emphasis on our relationship with HP, HP represents only one of numerous OEM relationships we have around the world. We have meaningful relationships with HP, Dell, Acer including Gateway and Packard Bell, Lenovo, Fujitsu, Toshiba, ASUS, and Sony among many others. We continue to aggressively pursue valuable OEM deals, recently winning multiple competitive agreements.We won a number of OEM deals in the last quarter. I mean working with the ThinkPad brand, working with some extensions with Dell around SMB and their gaming platforms, and so we definitely see that the numbers of units in the OEM market that we are associated with is definitely up.
-Enrique Salem, Symantec CEO, Conference Call
It's also important to note that we have a very broad portfolio, so that portfolio actually affords us something that some of our competitors can't do. If somebody gets irrational in pursuit of one of these deals, we'll just drive, and we'll just say we'll take some of that profit and return it to our shareholders, in the form, probably of cash that we generate, and then drive the share repurchase, and then invest in other parts of the business.
I mean, that's the great news about Symantec is that we don't need to be irrational. We need to be very focused and disciplined, and make sure that we understand the dynamics of our business, and right now, as James said, we enjoy a great margin in consumer that helps us drive investments, or reallocate some money to other opportunities.
-Enrique Salem, Symantec CEO, Symantec Analyst Day
And this aversion to pursuing less profitable deals is at least partially supported by the doubt expressed by the Chief Accounting Officer at McAfee:
But a lot of these registrations in a lot of these markets that we've penetrated are some of the emerging markets. And those are not mature, so we're still monitoring and watching how those are maturing and what the conversion rates are. Clearly, in some of those emerging markets we're not going to see and didn't even plan to see the conversion rates that we see in North America with, for instance, the Dell relationship, a very mature model. We can pinpoint that pretty accurately from a modeling perspective. We've taken a conservative view in our expectations in some of these emerging markets. And, although they're registering, we still need to see the conversion come through. But, so far, we're seeing some good signs that things are on plan.
-Keith Krzeminski, McAfee CAO, JP Morgan Telecom Conference
I’m more optimistic about Symantec’s strategy than McAfee’s, but I’m trying not to weigh it heavily in my analysis. This is a space where an aggressive acquisition strategy could work very well, both long and short-term, and McAfee’s DeWalt is the man for the job. Given his strategy, he’s assembled the right team for the job. However, one key variable that sticks out in this comparison is how many of Salem’s crew are home-grown Symantec employees, and how many of DeWalt’s acolytes followed from Documentum, to EMC, to McAfee. Only 4/14 of DeWalt’s executives have been at McAfee for more than 5 years, or joined McAfee in an acquisition where cumulative time spent at MFE and the acquired company exceeds 5 years. Somewhere between 10 and 14 of Salem’s 19 executives meet the same criteria. The 4 executives I’m not sure about joined Symantec with the Veritas acquisition, but I can’t find any information on how long they worked there. It would only have to be one year to make the cut. At McAfee, Milam the chief marketing officer, DeCesare the VP of worldwide sales, and Gabbert the VP of human resources all followed DeWalt from EMC. DeWalt is aggressive and charismatic, and highly valuable to McAfee, but if he leaves, what kind of leadership vacuum will be left behind? We see evidence of this power when we compare DeWalt’s salary in 2007 and 2008 to John Thompson’s (SYMC CEO for the years ended 2007 and 2008). In 2007 and 2008, DeWalt earned $5.56 million and $7.528 million respectively, compared to $4.782 and $5.639 respectively for Thompson. (Keep in mind SYMC has over 3x the revenue and NI of MFE.) We also see less of a disparity between CEO and other executive’s pay with many SYMC execs earning over $3 million while MFE execs typically earn around $2 million in total compensation.
When earnings are announced, both of these companies release heavily adjusted non-GAAP income statements. While the expenses added back are non-cash, they are generally recurring and represent an economic reality. Both companies add back stock-based comp, amortization of purchased technology, amortization of intangibles, and restructuring charges. On top of the already mentioned expenses, McAfee takes the liberty of adding back legal settlement costs, acquisition related costs, and SEC investigation costs. Symantec adds back executive incentive bonuses but at least they also admit that (immaterial) gains from a patent settlement are one time and pull those out. The non-GAAP earnings are definitely smoother and easier to analyze, but as far as I’m concerned, they do not reflect reality. Management won’t work for free and acquired technology looses value over time.
I’ve made some adjustments to the income statement, but my adjustments aren’t nearly as aggressive as the non-GAAP numbers provided by management. For Symantec, I included the $7 billion of goodwill impairment in 2009, an impairment of assets held for sale, and some other generally immaterial line items over the past few years. For McAfee, I didn’t count the SEC investigation charges, a sale of technology that net $250 million in 2004, and a handful of other immaterial charges. For both companies I removed in-process R&D charges that are effectively immediate goodwill impairments.
With a realistic view of each company, we can start working our way down the income statement starting with revenue:
The shape of these two curves is starkly different. SYMC appears to be decelerating, while MFE is picking up steam. If this trend continued, I would say SYMC shareholders are in for a rough ride and MFE shareholders might actually get their money’s worth. What’s also starkly different is the CAGR of each company. Even if MFE consistently maintained its LTM revenue growth rate of 23.1%, it wouldn’t outpace SYMC’s long-term 27.9% CAGR. But the shape and even the slope of the curve aren’t important without context. To grow revenue long-term, a company needs to turn revenue into profits so that it can reinvest. By comparing margins, we get a better sense for what’s really happening.
What immediately jumps out is 2006 for SYMC. Revenue grew significantly as a result of the Veritas acquisition. Unfortunately this crushed margins as R&D and Sales & Marketing expenses exploded. In 2009, SYMC managed to grow EBIT margins back to 16.0% compared to 31.9% in 2005. On the one hand, SYMC is fundamentally different now that they have this storage and data management business with higher costs and potentially lower growth prospects. However, we do see that management has made significant improvements to grow EBIT, and it stands to reason that there is more room for growth as recent acquisitions are better integrated and SYMC takes advantage of opportunities to cross-sell.
MFE is a different story. As revenue bottomed out in 2004, margins bottomed out as well. They regained a foothold in 2005 (F2006 for SYMC) when Symantec was distracted with Veritas. Margins have since returned to normal. This raises my concern for what might happen if MFE experiences harsher than expected macroeconomics, such as weak conversion of free-trial users to paid subscribers from OEM relationships. We also see that MFE has had erratic margins, peaking in the year SYMC made their big acquisition. Possibly they were taking advantage of market disruption. Originally, my long/short thesis was based in part on declining margins for MFE, but that disappeared when I removed in-process R&D expenses. However, I am still suspicious that MFE margins will deteriorate while SYMC expands. A large portion of each quarter’s revenue comes off the balance sheet as deferred revenue is recognized. The offsetting accounts are cash and prepaid expenses. When we divide prepaid expenses by deferred revenue for each company, we see that MFE has consistently grown from 3.8% in 2005 to 16.8% LTM. Conversely, SYMC has decreased prepaid expenses as a function of deferred revenue from 1.9% to 0.8% over the same timeframe. It’s possible that the nominal difference is a function of accounting practices, but the trends are meaningful, and indicate that MFE’s gross margin is shrinking.
I’ve been reading Michael Porter’s “Competitive Advantage”, and he explains a number of ways in which “good” competitors can benefit market leaders. One that stood out to me was the absorption of demand fluctuations:
Revenue growth and margins provide evidence for Porter’s hypothesis. The question going forward is what options SYMC has to respond to McAfee’s progress. For a little historical reference, Bill Brenner explains Symantec’s lack of strategic vision in 2006 relative to McAfee, particularly in reference to bundling and integrating. Now that a few years have been spent looking inward and many of these problems have been worked out, management has explicitly stated that one of its goals for F2010 is market share gain. Depending on how aggressive they are, they might pursue more partnership deals or even launch an advertising campaign to pull customers to retail stores where SYMC has a stronger presence. In terms of commercial business, Neil Roiter believes SYMC is taking a leadership position in endpoint protection.
Before we start thinking about earnings multiples, it pays to look at one other possible earnings adjustment and cash flow. With my adjusted earnings as a base, I have further adjusted earnings by capitalizing R&D expense. I assumed that R&D is useful for (and depreciated over) 3 years, which is probably not far from the truth. Each year, I add back the present R&D expense, and then subtract out 1/3 of the R&D expense from each of the last three years. In general, the effect of this adjustment is to raise earnings for each given year, but it decreases the earnings growth rate, which should result in the same valuation. The adjustment more accurately reflects reality as R&D is expected to benefit more than just the present accounting period, and it smoothes out jumps in R&D spend such as in 2006 for SYMC. FCF for these companies should also be higher than earnings because deferred revenue is a significant balance sheet item. Also, for both companies, CapEx is only a fraction of D&A, so CapEx probably doesn’t really reflect the expenses necessary to maintain current cash flow or earnings. I’m going to leave cash flow numbers unadjusted for simplicity, but this means they’re only really useful for comparison purposes, FCF isn’t a good basis for valuation here. The earnings and FCF numbers below are for the last twelve months, and the Cap. R&D earnings is for the fiscal year end because I didn’t capitalize R&D on a quarterly basis.
We can also compare these numbers to forward analyst estimates from Bloomberg:
What we see from these charts is that analysts expect SYMC margins to continue expanding while revenue stays flat, and MFE will experience revenue growth and margin expansion. This begs the question, what do analysts believe SYMC is going to do with their cash? Although I can’t predict what, I’m guessing they’ll generally reinvest it in profitable opportunities. On the other hand, MFE continues to grow revenue at a reasonable rate. I believe these numbers completely fail to take into account the possibility of Symantec responding to market share loss by becoming more aggressive. I also believe this discounts Symantec’s growth opportunity relative to McAfee’s. Today, SYMC is trading at 14.7x 2009 earnings and 14.3x 2010 earnings, compared to 28.3x and 23.2x for MFE. Bloomberg didn’t have earnings estimates for 2011, but if we assume that margins are the same between ‘10 and ’11, SYMC’s ’11 multiple is 13.6x compared to 22.4x.
Long/Short & Options
SYMC isn’t trading at a compelling valuation by itself. 15x earnings would probably be fair, 10x earnings would be a steal. Of the two, MFE is more exciting as a short given the 30x earnings multiple that assumes that SYMC won’t compete effectively. But the real value of this analysis comes from the relative price disparity between SYMC and MFE. Especially given how risky the global economy is today, the ability to reduce systematic risk is valuable. Some sort of a long/short play is the best strategy here.
One other thing to consider is the options market, where both SYMC and MFE have an implied volatility of around 30%. This is as nonsensical as the relative price disparity. With a high growth acquisition strategy and a high earnings multiple, McAfee is swinging for the fences. Symantec on the other hand, is moving more slowly, carefully choosing which opportunities to take advantage of. The fundamentals indicate that MFE will be more volatile over the next few months than SYMC. Therefore buying volatility on MFE and selling on SYMC could also be part of our strategy.
We can combine these misvaluations in a number of ways. The simple long/short strategy capitalizes on the price disparity, but investors are exposed to the risk of Symantec not reacting aggressively enough and ceding the #1 market position. A long SYMC position combined with offsetting puts on MFE still allows investors to benefit from price convergence, but it also limits risk that MFE will continue to outperform. By selling puts on SYMC and buying puts on MFE, investors benefit both from price convergence and the extra volatility we expect to see for McAfee. Plus, we can sell puts at a price where we would be more comfortable buying shares today, maybe around an earnings multiple of 14x. In the best-case scenario, SYMC goes up and we keep the put premium, and MFE tanks yielding high returns on the puts. In the worst-case scenario, MFE outperforms and we loose the put premium, and SYMC looses valuable market share forcing us to buy shares at a multiple we find reasonable today, plus we keep the put premium.
EMC poses two threats to my long/short thesis. First it competes with SYMC in the Storage and Server Management segment with deduplication software. Given that SYMC’s Storage and Server Management revenue grew 7% and gross margins expanded 13% in F2009, I get the sense that EMC is not pressuring SYMC excessively. However, EMC operates very close to the customer, providing hardware and other forms of support, and it is no stranger to the industry as one of the world’s largest software companies. With annual earnings double that of SYMC, EMC certainly doesn’t lack the resources to compete aggressively if it perceives a threat. EMC recently surprised some people with the acquisition of Data Domain, proclaimed to be #1 in deduplication storage, and they’re well aware of where the battle-lines are drawn.
Also, a remote possibility but a scenario worth considering: EMC might consider MFE as a takeover target. Financing shouldn’t be an issue with enough cash on the balance sheet to afford it free and clear, plus MFE has cash and no debt. The second line of EMC’s annual report states “EMC's Information Infrastructure business provides a foundation for customers to manage and secure their vast and ever-increasing quantities of information”, a goal that seems difficult to achieve without considering the threat of computer crime. This concern was addressed in 2006 with the acquisition of RSA Security for $2 billion, which is already competing directly with SYMC. Also, MFE’s CEO, DeWalt, was the CEO of Documentum, acquired by EMC in 2003, where he then worked his way up to become the president of software sales & services. He was well respected, he hasn’t been forgotten, and EMC recently teamed up to offer McAfee customers online PC backup.
MFE is more compelling to me as a short than SYMC is as a long, but I think the real value comes from combining the two positions to eliminate systematic risk. The market for security software is strong given the increase in computer crime and the shift we’ve observed from juvenile malicious crime to organized crime for profit. Despite positive macro trends, the competitive landscape is extremely complex, and despite the fact that SYMC has played nice for a number of years seeking fat profit margins, things are about to heat up as MFE vies for #1 market position. Analysts have downplayed the interaction between industry players as a meaningful source or risk, focusing only on acquisition strategy. But it looks like things are about to change, and for MFE to meet expectations, they’ll have to prove they have a sustainable competitive advantage, something I don’t see much evidence of.