F5 Networks Grows Security Footprint As Cloud Expansion Continues

F5 Networks originally built its business on the foundation of hardware, with load balancer and Application Delivery Controller (ADC) gear. Now in 2019, the focus has shifted someone to software, as the movement toward the cloud is a key driver for many companies.

The movement away from physical hardware was a key theme in F5 Networks 2Q19 earnings call on April 24. For the quarter, the company reported revenue of $554.9 million, for a two percent year-over-year gain. Net income was reported at $116.1 million, up from $109.6 million in the second quarter of 2018.

“Security services, including Advanced WAF and bot mitigation are leading the vast majority of our customer conversations and public cloud continues to be our strongest software growth area,” Francois Locoh-Donou,  President and Chief Executive Officer, at F5 Networks said during the earnings call.

Systems revenue which includes F5 Networks network hardware appliance was reported at $192 million, for a 5% year-over-year decline. System revenue accounts for approximately 81% of F5 Networks’ product revenue. In contrast, software related revenue grew by 30% year-over-year and represented approximately 19% of product revenue.

Cloud Is “Elongating” the Sales Cycle

The movement to cloud has had multiple impacts on F5 Networks from both a positive and negative perspective.

Locoh-Donou said that as organizations adopt a cloud-first mentality, hardware investment and use cases are being scrutinized, leading to more time being required to close deals.

“The phenomenon there is as customers adopt the stance that is more software first or cloud first, they do scrutinize their spend on hardware more and as a result, the approval cycles for hardware are getting elongated,” Locoh-Donou said. “I think that’s what we’re seeing really as the dynamics in large enterprise organizations.”

Network Security

Overall, security use cases are the key driver for F5 Network’s software growth rate. In addition to Web Application Firewall (WAF), Locoh-Donou said that F5’s anti-bot and machine-generated traffic monitoring and blocking capabilities is appealing to companies that continue to face an increasing array of threats.

“We are also seeing new security use cases emerge, including privileged user access, credential stuffing and zero trust,” he said. “As an example, during the quarter, we deployed a combination of access policy manager and our Advanced WAF at an international energy company.”

The NGINX Future

The biggest thing in F5 Networks immediate near term is the pending $670 million acquisition of application delivery software vendor NGINX, which was announced on March 11.

While some analysts have seem potential overlap between F5 Networks existing capabilities and NGINX, Locoh-Donou doesn’t see it that way. He said that the NGINX product line isn’t a cannibalization of the things F5 Networks does today, rather it’s a growth area for new applications that are being built and deployed either on-premises or in public cloud.

“We are excited by the complementarity between F5’s cloud native app services platform and NGINX’ controller,” Locoh-Donou said. “sA a result, post-close we expect to converge both under one product family using the NGINX brand and maintaining the momentum in NGINX’ current offering. This converged offering will address a larger total addressable market and will span a broader set of used cases across DevOps and Super-NetOps customer personas.”

Sean Michael Kerner is a senior editor at EnterpriseNetworkingPlanet and InternetNews.com. Follow him on Twitter @TechJournalist.

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