Palo Alto Networks filed a form S-1 with the U.S. Securities and Exchange Commission in formal preparation for an initial public offering (IPO) -- a long-anticipated move for the fast-growing network security upstart.
Palo Alto's plans are for an IPO worth up to $175 million. The S-1 filing did not indicate how many shares the company will put up for sale, nor a potential price range. Morgan Stanley, Goldman Sachs and Citigroup are listed as lead underwriters for the deal.
Palo Alto's filing revealed that the company has more than doubled its revenue in the past year, but as of last summer was not yet profitable. For Palo Alto's most recently completed fiscal year, ending July 31, 2011, it posted a loss of $12.5 million, compared to a loss of $21.1 million a year earlier. Its fiscal 2011 revenue was $118.6 million, more than twice 2010's revenue of $48.8 million.
The company has been hinting at an IPO for several years, and became cash-flow-positive about eight quarters ago. It appointed a new chief financial officer, Steffan Tomlinson, the former CFO of Aruba Networks and Peribit Networks, in early February.
Palo Alto has become a favorite of network security solution providers and emerged as an aggressive competitor to Cisco, Check Point, Juniper and other major competitors. As of last fall, the company had recruited a lion's share of nationally-known security, networking and data center partners who told CRN that Palo Alto's core technology -- so-called next generation firewalls that manage applications and content by user instead of by IP address or port -- was disruptive to incumbent vendors in the space and that the company had gotten strong on both marketing and channel program support behind its good notices.
The S-1 filing revealed that as of Jan. 31, 2012, Palo Alto had more than 6,650 customers in 80 countries. Greylock Partners and Sequoia Partners each have 22 percent stakes in the company, which was founded in 2005.
Last summer, Palo Alto hired Mark McLaughlin, the former CEO of VeriSign, as its new chief executive. In a November interview with CRN at Palo Alto's Double Down Partner Conference in New Orleans, McLaughlin said the company would continue to invest in partners and that an IPO was a definite possibility.
"What I told the employees was an IPO is possibly in our future but it's a capital-raising event," McLaughlin told CRN. "That's it at the end of the day, so let's not overstate. But to be public you have to be three things. First, you have to deserve to be public, financially. This company today could be public based on its financials. You have to be ready to go public, and there are a lot of processes and procedures, and we're working diligently on that. The third thing is you have to pick the right time do that. I view an IPO, and I've told the company this, as getting on the field. That's not the end of the game."