Fortinet Fires Up for IPO

SAN FRANCISCO -- Security vendor Fortinet Inc. is gearing up to file for an IPO later in 2005, one of the companys top execs revealed to NDCF at the RSA Conference in San Francisco.

”We’re on track to file for IPO later this year,” says Richard Hanke, the company’s VP of product management. This is likely to happen sometime in the second half of the year, he adds.

Although not exactly on a par with Brad and Jen’s marital status, there has been plenty of speculation about Fortinet’s future plans. Over the last few years the company has earned a reputation as one of the hottest vendors in the security space (see Top Ten Private Companies).

Even as the technology sector emerges from a period of economic slowdown, cash has hardly been a problem for the Sunnyvale, Calif.-based vendor. Fortinet raised $30 million in August 2003 and came right back for another $50 million in March 2004, bringing the firm’s total funding to $93 million (see Fortinet Score $30M Funding Round and Fortinet's Money Machine Rolls On).

Fortinet's flagship product is FortiGate, a sort of security "god box" which combines hardware-based firewalls with VPN support, intrusion detection, and purpose-built ASICs.Paul Saunders, an investment banker W.R. Hambrecht & Co. was not exactly surprised by the news. "They have more revenue than any other privately held information-security startup and incredible traction in a number of different markets," he says.

John Oh, director of corporate communications at application delivery specialist NetScaler Inc., another startup attracting plenty of attention, agrees. “They are a high-revenue company and they have been shipping a lot of boxes,” he says.

Fortinet also possesses a CEO, Ken Xie, with a proven track record in the security market. Prior to setting up Fortinet in 2000, Xie founded NetScreen Technologies, which itself went public and was later bought by Juniper Networks Inc. (Nasdaq: JNPR) for $4 billion (see NetScreen's Screaming IPO and Juniper Buys NetScreen).

But preparing for an IPO in the era of Sarbanes-Oxley can place a significant strain on a startup’s resources, and some serious planning is needed (see IPOs Happen: Carl Russo Speaks). ”We’re going through the process to ensure that we have all the systems in place,” assures Hanke. “We have teams assembled within Fortinet that are dedicated to working on this project.”

However, successfully completing an IPO is also subject to the vagaries of the technology market, warns Paul Saunders. "Any company that is going public is subject to IPO market conditions," he says. "If the Nasdaq is going down, then it will be difficult to get it done."Certainly, even the most eagerly anticipated technology IPO of recent years was not without its hiccups (see Google IPO in Doubt and Tech Cash Slashed? Learn From Google).

But will all this prove a distraction from Fortinet’s core business? Hanke is adamant that it will not. “The processes are in place for the product lifecycles and the development –- we have mapped out the roadmap,” he says.

This means adding functionality to company’s range of security devices, according to Hanke. The company recently filled out its services portfolio with a new anti-spam offering and is also planning to extend the Border Gateway Protocol (BGP) for routers across its devices.

The company is also planning to extend its global footprint. Fortinet currently has nine strategic hosting centers dotted around the world. These sites send regular updates to the FortiGate and FortiWifi firewalls for content filtering.

At the moment, these sites are predominantly located in the U.S., Europe, and Asia, although Hanke says the company’s growing global presence means that more centers are now necessary. “We will be adding ones in South America, Australia, and India this year,” he says. A new center in South Africa could also be on the cards, he adds.— James Rogers, Site Editor, Next-Gen Data Center Forum