Palo Alto Networks CEO: 'No Other Competitor Can Match' The Security Vendor's Capability

As some security vendors have faltered recently, Palo Alto Networks has shone, posting strong growth numbers in the first fiscal quarter of 2016 and notching some digs at its competitors -- which CEO Mark McLaughlin said Palo Alto continues to top.

In reporting its earnings Monday, McLaughlin highlighted some of the company’s more than 1,000 customer wins in the quarter, singling out deals such as its win with one of the largest software companies in the EMEA region, where it beat out Check Point; a high-profile government agency that adopted endpoint security solution Traps and Autofocus in a competitive situation; a large biopharmaceutical company, where it replaced Check Point and beat Cisco in a seven-figure deal; and a large financial services company, where it also beat Cisco in a seven-figure deal.

’We’re not resting here,’ McLaughlin said. ’We know that our success is due to our intense focus on solving the hardest security problems. … We believe no other competitor can match these capabilities.’

[Related: Here's What Innovations To Expect From Palo Alto Networks In The Coming Months]

The wins translated to strong sales and earnings for the security vendor in its first quarter, ended Oct. 31. Palo Alto Networks posted sales of $297.2 million, up 55 percent year over year, and billings of $388 million, up 61 percent from the same quarter the previous year. Net loss for the quarter was $38.7 million, compared with a loss of $30.1 million in Q1 2015.

Shares were up more than 3 percent in after-hours trading after the quarterly earnings report.

’I’m pleased with our execution and remain confident in our ability to take market share,’ CFO Steffan Tomlinson said on the earnings call.

McLaughlin took time to slam Cisco, which has been very vocal in recent months about getting serious in the security market and has made multiple acquisitions in the space.

’We continue to beat Cisco handily, quarter after quarter,’ McLaughlin said.

McLaughlin also took direct shots at Fortinet and the competitor’s push into sales and marketing, arguing that it was likely a failing of technology, rather than marketing, that are causing its slower growth rates.

McLaughlin said these growth numbers and competitive wins speak to a move in the market away from legacy security vendors to next-generation security vendors, as well as a move away from point solutions toward those with a platform-based approach.

’It is increasingly evident to organizations globally that retrofitted legacy technology is not the same as purpose-built next-generation security capabilities," McLaughlin said.

"Customers and prospects understand and appreciate the high value associated with the only true platform in the market that natively provides prevention," McLaughlin continued, "as opposed to the alternative of legacy or point solutions, which cannot provide prevention and add more complexity and cost.

"As a result of these factors, Palo Alto Networks has established itself as a leader in next-generation security.’

McLaughlin also credited a growing recognition of security as a strategic purchase as well as healthy overall demand.

Those competitive wins also extend to the high-end enterprise, which Palo Alto Networks made a push into earlier this year with the launch of PA-7080. McLaughlin said that, despite established competitors like Cisco, Juniper and Check Point in that space, Palo Alto Networks feels confident that high throughput capabilities and a next-generation security approach will continue to strike wins in the market.

’At the end of the day, what we’ve been doing is the same thing we’ve been doing [in the enterprise market],’ McLaughlin said. ’We haven’t seen a resurgence of anyone else in the market, frankly.’

McLaughlin also highlighted the importance of partners in the company’s strong growth.

’These relationships are very important to us and we see our partners as an extension of our sales team and reflection of our culture and values,’ McLaughlin said. Mark Anderson, executive vice president of worldwide field operations, added that in the last quarter, the company invited more than 548 partners for the first time to its Sales Kick Off, brought a couple of hundred partner engineers to its technical summit, and engaged 10 to 15 sales engineers and account managers in its internal new-hire training.

Going forward, Palo Alto Networks predicted that its Q2 sales will be between $314 million and $318 million, an increase of 44 percent to 66 percent year over year. The company predicted that non-GAAP earnings per share would be between $0.38 and $0.39.

PUBLISHED NOV. 23, 2015