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You've been in the security space a long time and had a front row seat to a lot of the consolidation going on, particularly among the vendors but also among many VARs and integrators. Do you see that trend continuing?
I do. I saw a statistic not too long ago that in the year 2000 there were about 1,000 security companies that were funded. A lot of those are still there, but the security evolved so quickly that a lot of companies created things that had features and functionality for a larger solution set, so I think you'll see a lot of those companies get picked up or consolidated into bigger solutions.
Is the long-term plan for Palo Alto Networks an initial public offering?
When I came to the company, obviously that was top of peoples' minds from an outside-in [point of view]. What I told the employees was an IPO is possibly in our future but it's a capital-raising event. 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.
But IPO is definitely the plan?
It is a possibility for the company. We don't need to raise any capital. We've been cash-flow-positive for some time, so we have a great deal of flexibility on that. It's one way to raise additional capital.
You said Palo Alto Networks is adding between 100 and 125 employees every quarter? Where are you hiring?
As you can imagine, a lot of sales and marketing as we try to keep up with demand, and in addition to that, a lot of R&D. My direction to the company, first, is innovation. We got to where we are because we're highly innovative, and to stay where we are we need to be highly innovative. Second is a customer focus. Obviously we want to sell more and partners want to sell more and we're very energetic about that, but we also have to have the same level of discipline and focus on quality of what we sell, so we're investing heavily in a customer perspective and backing up R&D from a QA perspective. Everywhere we bring people into the company, the bar is very high. It's difficult to keep a really high bar but that's a challenge for us and something that everyone is laser-focused on.
R&D is very important right now it sounds like, and in talking to the analysts and partners, it appears some of the bigger guys have fallen behind on R&D in this space.
You'll hear me use the word focus all the time, but this is the same concept. If you're a larger company, particularly with lots of business lines, it's difficult to be focused generally and very difficult to be focused specifically on rapidly changing trends, and to be nimble and invest accordingly. We think that's an advantage for us.
I have huge respect for Juniper, Check Point, Cisco, and large companies like that, and the folks there are very talented and smart people. But I've lived and experienced myself running a large company where your ability to react and especially to be proactive is hampered by size. When you're publicly traded, you have to do things on a short-term basis, so we think it's a great advantage for [Palo Alto Networks], this ability to be nimble. One thing to do, when you grow as rapidly as we are, is to try to keep the smaller company culture, particularly from an R&D perspective. We have a very interesting R&D structure. Everybody is in Santa Clara. We don't do any R&D not only outside the United States but outside the building. They're all in the same place, on the same floor. That creates some hiring challenges because we're in such a super-competitive market, but we're doing it intentionally because of the high quality of people we get and the resulting quality of their interaction. We have very little bureaucracy in the company in general.
Which is hugely important for a company at your level.
It is. We don't have meetings about meetings.
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