Ambitious Palo Alto Networks May Be Planning IPO

According to Gartner, the firewall/VPN market is estimated to be worth $5.9 billion in 2010, reporting 10% growth over the previous year’s $4.4 billion in revenues. Gartner estimates revenues for 2011 at $6.3 billion. In their recent Magic Quadrant for Enterprise Network Firewalls, Gartner identified Palo Alto Networks as a leading player.

The Business
Palo Alto Networks was founded in 2008 by entrepreneur Nir Zuk. They are leading producers of hardware firewall products, and they make application-centric solutions that enable application visibility and policy control. Their product lets networks customize firewall security rules for different users and functions in a workplace. In an interview with Nir I conducted earlier, he said that his product helps companies save 60%-80% of their network costs.

Palo Alto Networks claim to be pioneers within the hardware firewall market. They also claim to have the only firewall that classifies traffic based on the identification of the application and not just on the port/protocol. Their product identifies, controls, and inspects SSL encrypted traffic and applications and is able to provide real-time content scanning to protect organizations from viruses, spyware, data leaks, and application vulnerabilities.

The company does not disclose their financials. Analyst estimates range from annual revenues of $200 million to as high as $700 million. The company claimed to have 2% of the firewall market a couple of years ago, and they turned profitable in 2009.

Palo Alto Networks Introduces a Variety of New Products
Palo Alto Networks plans to reach sales of $1 billion in the next few years through sale and development of other new products. As part of their product expansion, last year, they launched the PA-200, a next-generation firewall model for enterprise branch offices; GlobalProtect, an Apple iOS–focused product; and WildFire, a firewall service that addresses modern malware.

The PA-200 series firewall provides the application, user, and content-based security that their flagship security product, PA-5000 provides at an enterprise’s headquarters. The PA-200 is a low-cost, lower-scale solution specifically designed for smaller branches. It comes with the same features as the PA-5000.

To date, the company has received funding of $64.6 million, with investment from Greylock Partners, Sequoia Capital, Globespan Capital Partners, Lehman Brothers, Jafco Ventures, JAIC, and Northgate Capital. According to market reports, Palo Alto Networks is looking to go public and has hired IPO bankers. The IPO is expected to arrange funding for $250 million, pegging the company’s valuation at $1.5 billion.