BT has announced a multi-million-pound stake in risk management firm Safe Security. In this article, I will take a look at what the company’s first major outside investment in cybersecurity since 2006 means for shareholders.
BT invests in cybersecurity
The need for cybersecurity is becoming increasingly vital as we move into another era of technological advancement. The figures clearly highlight the importance of preventive online protection as almost half of all UK businesses (46%) reported having a cyber-attack in 2020.
As a result, many risk management companies such as Crowdstrike, Zscaler and Fortinet have all received huge investment in the past few years and their share prices have skyrocketed.
The fact that there is an essential need for cybersecurity is the reason why I think that this investment with Safe Security can only be good news for the BT share price.
Philip Jansen, BT’s chief executive, said that the need for cybersecurity was a high priority for companies and governments fighting against the oncoming onslaught of cyber-attacks.
“Adding SAFE to BT’s proactive, predictive security services will give customers an enhanced view of their threat level, and rapidly pinpoint specific actions needed to strengthen their defences”, he said in a recent statement.
As part of the investment, Safe Security granted BT with the exclusive rights to use and sell SAFE to businesses and public sector bodies with a further outreach to integrate the system into its global portfolio.
I have been bullish on BT since February, and after this deal I am even more confident that BT shares deserve a secure place in my portfolio.
BT shows resilience
Of course, it isn’t just this new investment that gives me the impression that the BT share price will continue to rise.
Even with the devastations caused by the pandemic to most industries, BT was able to perform fairly sustainably in 2021. Its revenues were only 7% lower than the previous year at £21.3bn and profits dropped 15% from the year before at £1.47bn. The company was also able to decrease its debt to £17.8bn.
BT has shown that it can manage to operate successfully even during the hardest times. This is another reason why I hold shares in the company.
There are still points to consider
However, there are still some issues that could affect BT negatively in the near future.
Firstly, the pension deficit is a problem that has been looming over BT’s head for quite some time now, standing at a total of £8bn. This could scare away future investors and could likely hurt profits in the coming years.
Further, the BT share price has not been the most stable over the past few years. It is still down by around 50% since 2016.
What does this investment mean for the BT share price?
Whilst I have doubts that the BT share price will be rising to pre-pandemic levels any time soon, I believe that this deal with Safe Security is another step on the road to recovery and we could see a steady rise in price.
As long as BT continues to execute investments that show potential growth and scale, I will be holding my shares in the company.
John Town has positions in BT and Crowdstrike. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.