Palo Alto Networks CEO: Big Q4 Revenue Gains Follow Successful Sales Reorg

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Six months after a sales reorganization, Palo Alto Networks CEO Mark McLaughlin said the security vendor is starting to see "solid gains" from the changes as it reported a 27 percent increase in fourth quarter sales.

McLaughlin said on the Santa Clara, Calif.-based company's year-end earnings call Thursday that the company is progressing along its reorganization, completing the design, communication, and implementation of the new plan. He said the company is now in the "run time" phase of the reorganization to re-establish and strengthen relationships with customers.

"[We are at the] bottom of the fifth [inning]," McLaughlin said. "We're exactly where we expected to be at this time, and we're very happy with the progress."

[Related: Palo Alto Networks Sales SVP To Retire, Will Be Replaced By Salesforce EVP]

Palo Alto Networks took an earnings hit in the second quarter from sales execution issues that resulted in a "disappointing" sales performance.

The go-to-market problems stemmed from the company's sales playbook, which McLaughlin said has driven high growth in years past, but no longer sees the same return on investment. The playbook had the company splitting territories by industry and by customer size, as well as investing in sales and marketing. McLaughlin said those changes occurred too quickly, over-complicating the go-to-market strategy and leading to weaker relationships with customers.

Palo Alto Networks has since worked to recalibrate its sales go-to-market by reorganizing its account coverage model, re-tooling its sales and marketing resources and updating its second half revenue expectations. The company had said it expected to see the effects in the second half of 2017.

McLaughlin (pictured) said Palo Alto Networks is "seeing the fruit of those efforts in the Q4 results." He highlighted the addition of 3,000 new customers in the quarter, bringing the company's total customer base to more than 42,500 customers.

"This is by far the strongest quarter for new customer acquisition in our history," McLaughlin said.

McLaughlin said the sales reorganization also was a large driver in the company's sales growth during the quarter. Palo Alto Networks reported sales of $509.1 million for Q4, a 27 percent increase. The company's quarterly net loss increased to $38.2 million from $31.4 million in the same quarter last year.

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