NGFW Vendor Palo Alto Going Public

Even as a Juniper law suit hangs over it, next generation firewall (NGFW) vendor Palo Alto is moving forward with its plans for a $175 million IPO.

By Sean Michael Kerner | Posted Apr 9, 2012
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In 2007, networking vendor Palo Alto released their first next generation firewall in an effort to shake up the market. Since then Palo Alto has grown from zero to a company that has 6,650 customers across 80 countries.

Palo Alto Networks is now taking the next step in the company's evolution by going public with an IPO. Palo Alto is looking to raise as much as $175 million from the offering. Palo generated $118.6 million in revenue in 2011, more than double the $48.8 million generated in 2010.

Though Palo is on rapid revenue growth rate the company has not yet generated a profit. For 2011, net loss was reported at $12.5 million, which is an improvement over the $21.1 million lost in 2010.

Generating profit isn't the only challenge that Palo will face in the public marketplace. The company has stiff competition as well as legal issues that it will have to deal with in order to be successful.

The Palo approach to firewalls is one that delivers context aware security for network traffic. It's an approach that was unique in 2007, but by 2012 it is one that has been adopted by multiple vendors, including networking giant Cisco. Cisco's ASA CX firewall lineup announced at the end of February is all about contextual awareness.

Palo is also involved in a legal spat with Juniper Networks. In December of 2011, Juniper filed a law suit against the company , alleging that it infringed on six of Juniper's patents. Palo's founders, including Nir Zuk and Yuming Mao, were both former Juniper employers and allegedly were aware of the Juniper patents.. The two Palo execs joined Juniper by way of the acquisition of NetScreen for $4 Billion in 2004.

According to Palo'sS-1 IPO filing, on February 9, 2012, it answered Juniper’s complaint – denying it infringed Juniper's patents. Additionally, Palo asserted that Juniper’s patents were invalid. Juniper responded on February 28 with a motion to strike down Palo's patent invalidity defense.

"Under the doctrine of assignor estoppel, an inventor of a patented invention who assigns the patent to another for value cannot later challenge the validity of the patent," the S-1 states. "Under some circumstances, courts have held that the doctrine of assignor estoppel applies not only to the assigning inventor but also to a company in privity with the inventor."

Palo has since filed their own brief in response and the S-1's legal timeline notes that Juniper filed a counter-response on April 2.

"If Juniper’s motion to strike is granted with respect to some or all of the patents at issue, we would not be able to argue in the District Court that the patents as to which the motion to strike is granted are invalid," Palo's S-1 states.

While the validity of the patents in question is currently at issue, a trial date has already been set, though it's not until February 24 of 2014.

"We intend to defend the lawsuit vigorously," Palo stated. "Given the early stage in the litigation, we are unable to predict the likelihood of success of Juniper’s infringement claims."

Sean Michael Kerner is a senior editor at InternetNews.com, the news service of the IT Business Edge Network, the network for technology professionals Follow him on Twitter @TechJournalist.

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