Fortinet has had Cisco Systems and Check Point in its crosshairs. The company, however, is now feeling increased pressure from relative newcomers that have attracted attention by investing heavily in marketing sales activities, said company founder and CEO Ken Xie. On Friday, Xie pledged to partners that growth will continue despite competitive pressures as he aims to turn Fortinet into a billion-dollar company by 2015.
Kicking off the company's 2014 Global Partner Conference, Xie said his company, the third-ranked maker of next-generation firewall appliances and other networking gear, is seeking to make gains in a growing field of vendors. The NGFW market is impacted by the focus on new ways to detect advanced threats. Xie said his company made a mistake by not investing enough in marketing and sales, giving newcomers Palo Alto Networks and FireEye an advantage. Both competitors have attracted attention from enterprises with their malware analysis engines, growing their businesses quickly, he said.
"We didn't invest in sales and marketing, and that is making us relatively slow versus the aggressive marketing that they have," Xie said, pledging to increase marketing spending by 50 percent. "We really want to believe that with the right investment, we can grow faster than Palo Alto in this space."
The company has been focusing on its core technology. Xie said 85 percent of sales come from FortiGate NGFW appliances. If the company can hit a growth rate of 20 percent this year and next year -- expanding sales of its application delivery and data protection portfolio with WAN optimization and data loss prevention -- then it can get to the $1 billion mark by 2015, Xie said. Xie called the company's technology response to Palo Alto Networks and FireEye -- a virtual sandbox for malware analysis called FortiSandbox -- in the "early stages" of development. The nascent appliance was introduced in November.
"We are going to do a lot of promotion, education and marketing ourselves," Xie said. "The message is that we're not only there to secure your gateway, but also focus on the cloud and customer side … we have all the solutions to address the customer's issues."
Fortinet is in a position to make gains, but the business has been disrupted by FireEye, whose CEO, Dave DeWalt, has spent heavily on marketing activities. The company had a successful IPO, getting the nod from investors in its virtual sandbox for malware detection. Palo Alto introduced its WildFire file analysis capabilities, and Cisco Systems acquired Sourcefire for its FireAmp custom malware detection technology.
"Fortinet is way behind on sandboxing," said Eric Ogren, principal analyst at Stow, Mass.-based Ogren Group. "They've focused on performance and building their own sandboxing capability while their competitors have come to market faster through the cloud or by quickly acquiring the most established players."
Fortinet partners said they believe the company's executive team has made great gains, focusing on performance improvements and new capabilities to beat competitors in a side-by-side comparison of products. Margin and price is strong against competitors. Partners said they have been impressed with the support and attention they have received from the vendor.
Nathan Vincent of Billings, Mont.-based NextX Communications, told CRN that he has seen double-digit growth selling the company's networking gear after moving to Fortinet from selling Dell SonicWall appliances.
"My business is on the smaller side in terms of sales, but you wouldn't think that based on the attention we get and the support we've received when we needed it," Vincent said.
Fortinet's Xie also urged partners to sell across the portfolio into wireless extenders, access points, VPN and other devices. Jimmy Georgiou, president of Charlotte, N.C.-based Solution Start, a managed service provider, said he is having success selling the appliances to health-care providers, with an established client base of dentist offices, clinics and other facilities.
"It is strong in terms of performance, and the clients are happy with it," Georgiou said. "You can tell they have put a lot of effort into the core technologies that they develop."
Fortinet is an engineering, and research and development company first, said Ryan Porter, Fortinet's director of strategic alliances. Porter acknowledged the company's late entry into cloud sandboxing, but said the company can introduce products that don't have a negative impact on performance. Fortinet is also a late entry into wireless, he said, but it gives the company the ability to engineer and establish itself without stumbling on poor performance and price.
"When you are late to market, you can find the focus and execute on just that and that wedge can get you into the incumbent market that might not get you in otherwise," Porter said.
PUBLISHED JAN. 10, 2014