Fortinet Faces New Patent Issues, Departure Of CFO

Fortinet CFO Hal Covert is set to leave the company Oct. 1 to become the CFO of communications software company Openwave, Redwood City, Calif.

On top of that, security competitor Trend Micro has filed an enforcement complaint with the U.S. International Trade Commission, claiming that Fortinet is violating an Aug. 8 ITC ruling that bars it from selling its Fortigate appliances within the United States.

Partners, meanwhile, are complaining about spotty field support and wondering if it all adds up to trouble for the once high-flying security vendor on its way to an initial public offering.

For his part, Fortinet CEO and President Ken Xie told CRN that the company is in sound shape and on track to launch its IPO “soon.”

Still, Covert&s departure worried partners that were already dealing with a vendor shrouded in the doubt of a patent lawsuit. “I really want to know what the hell is going on out there,” said an East Coast partner, who asked not to be identified. “Customers are already uncomfortable, and this leaves a big question mark on what&s happening inside that company.”

Another partner told CRN that he has decided to “terminate” his relationship with Fortinet. “There are just too many issues to contend with at Fortinet,” he said. “We have had disappointment after disappointment. I just can&t keep explaining these things to my customers.”

Chris Andrews, Fortinet vice president of sales, Americas, said Covert&s departure wasn&t a sign of weakness. “Every time a CFO leaves a company, it raises an eyebrow,” he said. “But it isn&t always for a bad reason.”

Covert, formerly CFO of Extreme Networks, Adobe Systems and SGI, is moving to a much larger, publicly held company, and received an offer Fortinet couldn&t match, Xie explained. Fortinet is actively interviewing for a new CFO with experience in taking fast- growing, privately held companies public, he said.

As far as Trend Micro&s complaint with the ITC, it was expected, Xie said. The ITC in August ordered Fortinet to stop selling products that contain its antivirus software. The ITC&s order stems from an earlier ruling that Sunnyvale, Calif.-based Fortinet's antivirus software violates a Trend Micro patent dealing with scanning for viruses at the gateway.

Fortinet is complying with the order because its partners are selling product they purchased before the order took effect, Xie said.

Trend Micro general counsel Carolyn Bostick maintains that any Fortinet product sold by distributors or resellers also is affected by the order. And while distributors and resellers are documented in the latest enforcement complaint, it is Fortinet&s responsibility to stop them from selling its product, Bostick said.

Despite the new complaint, Fortinet is on track to release within 30 days a new version of its antivirus software that does not violate Trend Micro&s patent, Xie said.

Amid its executive and patent troubles, partner complaints of spotty field support—particularly in the Southeast—are being addressed, Andrews said. Fortinet&s Southeast partners have been handled by its mid-Atlantic rep for the past few months, Andrews acknowledged, but a new Southeast rep is slated to start the first week of October.

“We have lost some people, but overall, we have increased sales and channel resources in the U.S. by more than 25 percent in the past four months,” he said. “We will end the year with an increase in head count.”

And all the turmoil isn&t hurting sales, Andrews said. The company expects to close its third quarter, ending this week, with year-over-year sales growth of 100 percent in the United States, he said. “We thought the Trend Micro ruling would have a small impact on sales, but it&s turned out to be largely a PR issue.”

With sales strong, the company is still on track to pursue an IPO, Xie added. “We don&t see any major issue stopping us from going forward,” he said.