Palo Alto Networks President: Customers Want Fewer Vendors That Can Do More Than Traditional Antivirus Products

Palo Alto Networks has moved aggressively into the endpoint market as the legacy network security vendor focuses on consistent outcomes no matter where data resides.

"We're going after traditional antivirus budget because customers have associated very little value with the money that they're spending on traditional antivirus," President Mark Anderson told Wall Street analysts Monday.

Roughly a third of the customers using the company's Traps advanced endpoint protection product had never before purchased a product from Palo Alto Networks, Anderson said. Although the offering is just three years old, Anderson said clients are selecting Traps on its own merits even if they have never bought a firewall from Palo Alto Networks.

[Related: Palo Alto Networks Tasks Global Partner Experience Leader With Helping Channel Monetize Public Cloud Opportunities]

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In addition to winning head-to-head comparison for its products, the consistency championed by the Palo Alto Networks platform will enable its client to focus going forward on matters like securing the application framework, according to Chairman and CEO Mark McLaughlin.

"Folks are definitely moving in the real platform direction, and we feel like we have the best one of those, and it continues to get better and better over time," McLaughlin said.

Having a platform that can secure the network, the endpoint, and the cloud allows end users to reduce the number of vendors they're using and the sprawl in their organizations, McLaughlin said, whether that be devices on a network or agents on an endpoint.

"Customers want that consistency," McLaughlin said. "They also want fewer vendors as a big picture matter."

Although Palo Alto Networks' competition has priced aggressively for quite some time, McLaughlin said his salespeople had been laser-focused on selling the value of the platform, an approach that has increasingly gained traction with end customers. As a result, the company is seeing good adoption of both its cloud offerings as well as its data center hardware, according to McLaughlin.

As customers increasingly adopt the entire platform, McLaughlin said Palo Alto Networks can avoid succumbing to the pricing machinations that are going on with the competition.

The profile of Palo Alto Networks' partner base has also changed as the company has grown, Anderson said. The company has worked very hard over the past half-decade at getting to the point where it can address the needs of the large, global systems integrators it was unable to serve seven or eight years ago, Anderson said.

"Now, we're at the scale where it's hard for them to avoid us," Anderson said.

Sales for the quarter ended Oct. 31 skyrocketed to $505.5 million, up 27 percent from $398.1 million the year prior. That crushed Seeking Alpha's estimate of $489 million.

Palo Alto Networks recorded a net loss of $64 million, or 70 cents per share, 12.5 percent worse than a net loss of $56.9 million, or 63 cents per share, the year before. On a non-GAAP basis, though, net income jumped to $69.8 million, or 74 cents per share, up 36.3 percent from $51.2 million, or 55 cents per share, last year. That beat Seeking Alpha's net income projection of 69 cents per share.

Palo Alto Networks' stock climbed $9.47 (6.64%) to $152 per share in after-hours trading on Monday. Earnings were announced after the market closed.

Subscription and support revenue for Palo Alto Networks soared to $319 million, up 36.2 percent from $234.3 million the year before. Also, product revenue strengthened to $186.5 million, up 13.9 percent from $163.8 million last year.

Sales in the Americas – which is by far Palo Alto Networks' largest region – increased by 25 percent, according to Anderson.

For the coming quarter, Palo Alto Networks expects non-GAAP net income to 78 cents per share to 80 cents per share on total sales of $518 million to $528 million. Thomson Reuters had been projecting non-GAAP net income of 77 cents per share on earnings of $519.7 million.