5 Boldest Statements From CEO Ken Xie At Fortinet Accelerate 19

Fortinet CEO Ken Xie took center stage at Accelerate 19 to discuss why network security is so hot, some advantages edge computing has over the cloud, the why the company doesn’t need to rely on big acquisitions to make a splash.

Primed For Growth

Fortinet Founder, Chairman and CEO Ken Xie said advances in mobile and cloud technology are making the security perimeter disappear, necessitating further convergence between security and networking. Xie told the nearly 4,000 attendees Tuesday at Accelerate 19 in Orlando that growth in immersive technology, IoT and 5G will require most data and applications to be processed on the edge.

Sunnyvale, Calif.-based Fortinet will benefit from this development, Xie said, since it's the only cybersecurity company to have invested heavily in both cloud and edge computing. Xie said Fortinet's innovative culture and focus on long-term investment put the company in an unparalleled position to meet the customer needs of today and tomorrow.

Here's a look at the most notable things Xie had to say during his keynote address about why network security is so hot, some advantages edge computing has over the cloud, the why the company doesn’t need to rely on big acquisitions to make a splash.

5. 'Security is no longer a moat protecting a castle and fortress, but more like a system in a human body.'

Security and networking need to brought closer together so that gains in performance don't come at the expense of protection, Xie said. Fortinet integrated security and Wi-Fi a decade ago, and is currently very focused on fusing SD-WAN and security together in a single box. And going forward, Xie expects Fortinet to be focused on marrying the potential of 5G with robust security.

Xie said traditional network routing and switching technology even today only addresses connectivity and speed, not security. For this reason, Xie said network security is the fastest-growing segment of the cybersecurity market today.

The network security market overtook the endpoint security market in size a few years ago, and Xie said the market size gap between network security and endpoint security will only continue to grow.

4. 'Edge computing will start eating the cloud going forward.'

Cloud and mobile technologies have largely replaced the PC and server market over the past five-to-ten years, Xie said. And in the coming years, Xie said the explosion of IoT and immersive technology such as smart glasses, smart watches, augmented reality and virtual reality will push computing to the edge, resulted in massive amount of data ending up there.

But due to connectivity, speed, latency and cost issues, Xie said between 70 percent and 80 percent of the data on the edge will never go to the data center or cloud.

From a cybersecurity perspective, Xie said the cloud is good for provisioning, management, aggregating and archiving. But the edge has an advantage around speed, latency, autonomy, and privacy, according to Xie. All told, Xie said the cloud is suitable for detecting threats, but the edge is superior at preventing them.

3. 'The total addressable market for Fortinet is much bigger than any of our competitors.'

Fortinet will continue gaining market share while growing faster than any of its competitors in the network security space, Xie said. The company has the second-largest firewall market share in the fourth quarter of 2018, according to Xie, overtaking competitors and trailing only Palo Alto Networks.

And Xie expects the debut the industry's first SD-WAN ASIC chip and the unveiling of 300 new features and capabilities on the company's flagship operating system will give Fortinet a huge advantage over its competitors going forward. Fortinet will continue to focus in cloud security, edge security, IoT security and OT security to ensure the company maintains its leadership position in all those spaces, he said.

"Fortinet has much bigger potential than any other competitor in this space all because of our long-term vision and long-term investment," Xie said.

2. 'Most of our competitors depend on acquisitions to acquire technology, acquire product, and address customer needs.'

Innovation is one of the key elements of Fortinet's culture, Xie said, together with openness and a focus on teamwork. The company has been awarded more than 600 patents, which Xie said is three times more patents than any of Fortinet's network security competitors have received.

This innovation has provided Fortinet with a long-term vision, Xie said, and is one of the company's biggest differentiators over the competition. It's also why the company has been able to build organically and shy away from major acquisitions, spending just $35 million on two tuck-in deals last year.

In contrast, Check Point purchased public cloud security player Dome9 in October for $175 million, while Palo Alto Networks has been on an acquisition spree since 2018, buying cloud security provider Evident.io for $300 million, endpoint security vendor Secdo for a reported $100 million, cloud security startup RedLock for $173 million, and analytics and automation vendor Demisto for $560 million.

1. 'We've done as well with growth as with profitability. Compared to some of our competitors - Palo Alto [Networks] is only focused on growth, and Check Point is only focused on profit - we have both.'

As enterprise clients consolidate around a smaller number of vendors, Xie said breadth of Fortinet's Security Fabric will allow customers to protect more of their attack surface. The expanding Security Fabric will also enable Fortinet's channel partners to grow their business faster and gain market share from competitors, Xie said.

Xie said Fortinet said the network security industry in both stock performance and shareholder return on a one-year, three-year, five-year, or ten-year basis. Profitable growth has been central to that mission, with Fortinet increasing revenue by 20.4 percent in 2018 to $1.8 billion and growing GAAP net income to $332.2 million, or $1.91 per diluted share.

In contrast, Palo Alto Networks grew revenue by 29 percent to $2.27 billion in the fiscal year ended July 31, 2018, but recorded a GAAP net loss of $147.9 million, or $1.61 per share. And Check Point increased GAAP net income in 2018 to $821.3 million, or $5.15 per diluted share, but grew sales by just 3.3 percent to $1.92 billion.

Neither Check Point nor Palo Alto Networks immediately responded to a request for comment.