Fortinet, Check Point Sales Wins Tied To Security Services Expansion

Network security giants Check Point Software Technologies and Fortinet told Wall Street investors last week that they are winning large enterprise deals, citing increased security spending from organizations seeking stronger threat-detection capabilities.

The two companies both pointed to investments in their strongest security partners, mainly large systems integrators and regional security companies, with engineering teams that can carry out complex deployments. They also said a large part of the sales wins were associated with large MSPs and telecoms, including Verizon, which are expanding managed security services, according to sources.

Check Point and Fortinet beat Wall Street estimates this week. Check Point revenue grew 8 percent to $370.4 million, beating the average forecast of $367.1 million. Fortinet revenue rose 25 percent to $193.3 million, exceeding the average forecast of $184.9 million.

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Fortinet had big wins at the federal level, landing contracts with the U.S. Navy, and the National Oceanic and Atmospheric Association. Deals in the U.S. grew 30 percent year-over-year as a result of an increased investment in partnerships with large national resellers that focus on midsize enterprises, said Fortinet CFO Andrew Del Matto, speaking to financial analysts on Wednesday.

Fortinet said its enterprise-grade appliances helped product revenue increase 26 percent year-over-year to $87 million. Services and support revenue increased 24 percent year-over-year to $105.6 million.

Check Point revenue grew 8 percent to $370 million in its fiscal third quarter, and its software blades grew over 22 percent, the company said.

Both companies cited rapid expansion of managed security services led by larger telecommunications providers as well as regional MSPs. Financial services deals were also strong.

Managed security services has grown significantly over the last three years, said Don Gray, chief security strategist at Omaha, Neb.-based managed security services provider Solutionary, an NTT company. The company has added a team dedicated to critical incident response services and has had seven long-term engagements in 2014, Gray said.

"Part of it has been, internally, the boards at organizations are starting to take security more seriously or becoming more concerned about the outside perception of their security practices," Gray said. "There isn't a lot of value in a SIEM spitting out potential warnings -- it's in a provider looking at security alerts, validating and investigating them and then interpreting them for the customer."

Fortinet cited a seven-figure data-center deal with a technology provider as part of an expansion of its cloud infrastructure services. It had a six-figure deal with a Fortune 100 telecommunications operator that was upgrading its antispam and remote access managed services. The company selected Fortinet's next-generation firewall and its FortiMail email security appliances.

Fortinet said it also had a six-figure deal with an existing Fortune 500 service provider that was expanding from firewalls to include web application security and advanced threat-detection services. The network security giant said the deal included its FortiWeb and FortiSandbox appliances.

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Large organizations are counting on managed services to supplement their IT teams for certain portions of their business, said Robert Breza, a financial analyst at Birmingham, Ala.-based Sterne Agee.

Small and midsize businesses are looking for more complete security and like the idea of paying a monthly fee to help manage their systems, Breza said. The security model is moving from purely alerting a customer that there may be a threat, to providing a range of incident response services to contain the threat, he said.

"Normally, services is slower growing but it's the fastest area of growth right now," Breza said. "Everybody is clamoring for outside help because they realize that they don't have enough in-house talent to manage it all."

Financial customers continue to be the strongest sector for Check Point but the company said it had won deals in retail, which has been hit with a long line of high-profile credit card breaches in 2014. It also had wins in the government and technology sectors, which had strong interest in its data center software blades.

All of the networking security vendors are seeing gains in the upper midmarket and large enterprises, said Dan Thormodsgaard, vice president of solutions architecture at FishNet Security. Thormodsgaard said Fortinet's high-end gear has been strong at FishNet, but added that organizations are selecting a variety of components, including security gear from pure-play vendors.

"Organizations are spending on security right now because they are seeing all of these breaches adding up over time," Thormodsgaard said.

Fortinet has increased its marketing and added sales and channel personnel dedicated to channel support, said Joe Sykora, vice president of Americas sales operations and channels at Fortinet.

"Managed services is very sticky and we're seeing huge success there," Sykora said. "Once you get a client on your managed services they tend to sign on and stay with their provider, so that's why so many partners are moving to that business model."