Fortinet Expands SD-WAN Vision For 2020 With Product, Partner Perks

Fortinet CEO Ken Xie says the company intends to work more closely in the coming year with service providers around SD-WAN and begin offering some managed SD-WAN services.

Fortinet CEO Ken Xie said the company plans to increase the market penetration of its fast-growing SD-WAN offering through technological and go-to-market innovations.

The Sunnyvale, Calif.-based platform security vendor intends to work more closely in the coming year with service providers around SD-WAN and begin offering some managed SD-WAN services, according to Xie. The big global systems integrators have begun to realize the benefits of SD-WAN as compared with a more traditional approach, which Xie said has opened the door to more work with the channel.

“Our secure SD-WAN offering continues to be a point of differentiation for Fortinet,” Chief Financial Officer Keith Jensen told investors Thursday.

[Related: Fortinet CEO: enSilo Will Benefit From Our Sales Force, Customer Base]

From a product standpoint, Xie said Fortinet plans to move beyond the wide area network by introducing a product later this month at Accelerate Barcelona 2020 that actually goes inside the network to take on challenges around internal segmentation and hyperscale.

Xie said the new product will help address issues around the local area network (LAN) in high-speed environments, which in turn will allow Fortinet to expand traditional parameter-based network security on both the WAN side as well as the LAN side.

SD-WAN represented a high-single digit of Fortinet’s overall billings in the fourth quarter, and added about seven points of product revenue growth for all of 2019, according to Jensen. That contribution greatly exceeds the impact SD-WAN had on Fortinet’s top line in 2018, when Jensen said its billings contribution was in the low-single digits at best.

New logos continue to account for roughly half of Fortinet’s SD-WAN billings, Jensen said, allowing the company to get more of a foothold in the large enterprise space.

Fortinet’s sales for the quarter ended Dec. 31 soared to $614.4 million, up 21.2 percent from $507 million a year earlier. That beat Seeking Alpha’s quarterly revenue projection of $602.9 million.

Net income sunk to $115.2 million, or $0.66 per diluted share, down 36.9 percent from $182.6 million, or $1.04 per diluted share, a year earlier. On a non-GAAP basis, net income jumped to $132.4 million, or $0.76 per diluted share, up 26.6 percent from $104.6 million, or $0.59 per diluted share, a year ago. That crushed Seeking Alpha’s non-GAAP earnings estimate of $0.69 per share.

Fortinet’s stock fell $2.35 (1.1 percent) to $120 per share in after-hours trading. Earnings were announced after the market closed Thursday.

For the full year, Fortinet’s sales skyrocketed to $2.16 billion, up 19.7 percent from $1.8 billion in 2018. Net income for the year dipped to $326.5 million, or $1.87 per diluted share, down 1.7 percent from $332.2 million, or $1.91 per diluted share, the year before.

The company’s growth was driven largely by success in its services business, with sales climbing to $375.6 million, up 22.7 percent from $306.2 million the year prior. Fortinet’s product sales also jumped to $238.8 million, up 18.9 percent from $200.8 million last year.

From a geographic standpoint, Fortinet’s sales in the Americas rose to $250 million, up 22.5 percent from $204 million the year prior. The Americas accounted for 41 percent of Fortinet’s revenue in the quarter, which is up from 40 percent last year.

For the coming quarter, Fortinet expects to see diluted non-GAAP earnings between $0.50 and $0.52 per share on revenue in the range of $555 million to $565 million. Seeking Alpha had been projecting earnings of $0.55 per share on sales of $555.9 million.