Tuesday, July 29, 2014

Time to Buy Fortinet?

The IT security market has always been highly competitive and the competitive dynamics in the industry are constantly changing. If Check Point Software Technologies  is the established pure play in the sector, and Palo Alto Networks   is the up and coming competitor, then Fortinet  sits somewhere in the middle. With that said, how is it best to look at the investment proposition with Fortinet? In addition, what do its recent, and well received, results really mean to the company?



Check Point Software, Fortinet and Palo Alto Networks, getting to know you
When looking at the three together, I can't help feeling that they could almost be the same company, just at different stages of their development. Indeed, there are some close relationships between them. Palo Alto Networks founder and CTO, Nir Zuk, used to be principal engineer at Check Point, but there is little love lost between the self appointed "Check Point Killer" and the company these days. In addition, Fortinet's VP of services, Michael Anderson, was formerly at Check Point, as was Michelle Spolver, Fortinet's VP of corporate communications.



These links -- although not uncommon in a niche IT industry -- serve to highlight the competitive nature of the industry. It's no secret that Palo Alto Network's is growing revenue in the 30%-40% range by trying to displace incumbents like Check Point, Cisco, and Juniper in the firewall market. But what is less understood is how Check Point and Fortinet are generating growth by competing in smaller and larger deal sizes respectively. They are increasingly encroaching on each others markets.


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