Renaissance Capital logo

Network security company Palo Alto Networks files for $175 million US IPO

April 9, 2012

Palo Alto Networks, which delivers a firewall that enables enterprises to safely run applications, filed on Friday with the SEC to raise up to $175 million in an initial public offering. The company sells its appliance-based solution to over 6,500 enterprises, service providers and government entities.

For the six months ended 1/31/12, revenue increased 141% to $114 million and operating income swung positive to $8 million. Product revenue, mostly appliance sales (72% of sales; 75% gross margin), increased 142% to $81 million. Services revenue (70% gross margin), which consists of subscriptions and support, increased 137% to $32 million. The one negative was that revenue declined sequentially in the most recent quarter, after increasing by at least 15% for four straight quarters. Management attributed this to strong U.S. government spending at the end of its fiscal year in September.

Nir Zuk, the CTO, founded the company in 2005 and owns 6% of shares. He previously founded OneSecure, which was acquired by NetScreen Technologies in September 2002. He served as NetScreen’s CTO until it was acquired by Juniper Networks in April 2004. Juniper filed a lawsuit against Palo Alto Networks in December, claiming patent infringement.

The Santa Clara, CA-based company is backed by venture capital firms Greylock and Sequoia (each own 22% of shares prior to the offering). Morgan Stanley, Goldman Sachs and Citi are the joint bookrunners on the deal.