Fortinet Stock

Fortinet, Inc. (Fortinet) is a global leader in cybersecurity and networking solutions for organizations, including enterprises, communication service providers, security service providers, government organizations and small businesses.

The focus areas of the company’s business consist of:

Secure Networking—The company’s Secure Networking solutions enable the convergence of networking and security across all edges to provide next-generation firewall (NGFW), software-defined wide area network (SD-WAN), LAN Edge (Wi-Fi and switch) and secure access service edge (SASE). Traditional networking lacks awareness of content, applications, users, devices, location and more. A secure networking approach converges networking and security into a single, accelerated solution. A specially designed operating system and security processors work in concert to improve network performance and security posture while decreasing footprint and power consumption. The company derives a majority of product sales from its Core Platform (previously referred to as FortiGate) network security appliances. Core Platform network security appliances include a broad set of built-in security and networking features and functionalities, including firewall, next-generation firewall, secure web gateway, secure sockets layer (SSL) inspection, SD-WAN, intrusion prevention system (IPS), sandboxing, data leak prevention, virtual private network (VPN), switch and wireless controller and wide area network (WAN) edge. The company’s network security appliances are managed by its FortiOS network operating system, which provides the foundation for Core Platform security functions. The company enhances the performance of its network security appliances from branch to data center by designing and implementing Application-Specific Integrated Circuits (ASIC) technology within its appliances, enabling it to add security and network functionality with minimal impact to network throughput performance. Along with the company’s secure Wi-Fi access points and switches, Fortinet helps organizations secure their networks across campuses, branches and work from anywhere (WFA) deployments. For the Japanese market, the company also offers high performance network switches marketed under Alaxala Networks Corporation for data center switching.

FortiOS supports many more secure networking markets and applications than just firewall. These include Network Firewall (NFW); Software-Defined Wide Area Network (SD-WAN); Secure LAN/WLAN (Wi-Fi and Switch) (SD-Branch/Campus); Secure Access Service Edge (SASE); Universal Zero Trust Network Access (ZTNA); and Encryption Applications (SSL Inspection, Virtual Private Network (VPN), and IPsec Connectivity)

Further each security application has number of customer use cases. For example, Network Firewall has the following use cases: Data Center Perimeter NGFW; North–South Internal Segmentation Firewall; Distributed Network Edge Firewall; East–West Micro Segmentation Firewall; Virtual Firewall (VM); Cloud Native Firewall (CNF); Firewall as a Service (FWaaS); Containerized Firewall; Endpoint Firewall; SMB Firewall; and Home Firewall.

Zero Trust Access—Fortinet’s Enhanced Platform Technology products and services extend beyond the network to create a cybersecurity mesh architecture to cover other attack vectors. The company’s Zero Trust Access solutions enable customers to know and control who and what is on their network, in addition to providing security for WFA. Zero Trust Access solutions include FortiNAC, FortiAuthenticator, FortiClient and FortiToken. Additionally, the proliferation of OT and internet of things (IoT) devices has generated new opportunities for it to grow its business. The company’s network access control solutions provide visibility, control and automated event responses in order to secure OT and IoT devices.

Cloud Security—The company helps customers connect securely to and across their individual, hybrid cloud, multi-cloud and virtualized data center environments by offering security through its virtual firewall and other software products and through integrated cloud-native capabilities with major cloud platforms. The company’s public and private cloud security solutions, including virtual appliances and hosted solutions, bring its Enhanced Platform Technology products and services into and across cloud environments, delivering security that follows their applications and data. The company’s solutions include network security, web application firewall and application programming interface (API) protection, cloud-native security and workload protection. The company’s Secure SD-WAN for multi-Cloud solution automates deployment of an overlay network across different cloud networks and offers visibility, control and centralized management that integrates functionality across multiple cloud environments. The company’s cloud security portfolio also includes securing applications in all environments in which they can be deployed, including physical and virtual data centers, clouds, and edge compute instances. Fortinet cloud security offerings are available for deployment in major public and private cloud environments, including Amazon Web Services, Google Cloud, IBM Cloud, Microsoft Azure, Oracle Cloud and VMWare Cloud. The company also offers managed web application firewall (WAF) rules delivered by FortiGuard Labs as an overlay service to native security offerings offered by Amazon Web Services.

AI-Driven Security Operations—The company develops and provides a range of products and services that enable the security operations center (SOC) teams to identify, investigate and remediate potential incidents in which cybercriminals bypass prevention-oriented controls. Given the breadth of the attack surface to monitor, as well as the volume and sophistication of cyber threats, artificial intelligence (AI) is a key part of these offerings, which include: FortiGuard and other security subscription services, endpoint security with endpoint detection and response (EDR), a range of breach-protection technologies plus the company’s security information and event management (SIEM) and security orchestration, automation and response (SOAR), all of which can be applied across the Fortinet Security Fabric. These solutions automatically deliver security intelligence and insights that help organizations to protect against and respond to threats through integration with Fortinet and third-party solutions.

FortiGuard Security Services—FortiGuard security services counter threats in real time with AI-powered, coordinated protection. All of the company’s security services are natively integrated into the Fortinet Security Fabric. This enables fast detection and enforcement across the entire attack surface. Risk is continually assessed and the Security Fabric automatically adjusts to counter the latest known and unknown threats in real time. It is able to close security gaps with context-aware, consistent security policies for users and applications in hybrid deployments across the network, endpoints and clouds.

Support and Professional Services—FortiCare Technical Support Service is a per-device support service, which provides customers access to experts to ensure efficient and effective operations and maintenance of their Fortinet capabilities. Global technical support is offered 24x7 with flexible add-ons, including enhanced service level agreements (SLAs) and premium hardware replacement through in-country depots. Organizations have the flexibility to procure different levels of service for different devices based on their availability needs. The company offers three per-device support options tailored to the needs of its enterprise customers: FortiCare Premium, FortiCare Elite and FortiCare Essential. The newly launched FortiCare Elite service provides 15-minute response times for key product families.

Consolidation of Technology and Architecture

The Fortinet Security Fabric has an open architecture designed to integrate Fortinet solutions and third-party solutions. The company’s product offerings consist of its Core Platform network security products and its Enhanced Platform Technology (previously referred to as Platform Extension) products, which are offered in a broad range of form factors spanning physical appliances, virtual appliances, software and cloud-hosted services. This enables the company to protect customers across all edges and deployment scenarios, including users, devices, networks, cloud and virtual data center. The company’s cloud- and hosted- products and services include sandboxing, EDR, email security, web application and API security, cloud networking security and cloud-native protection, as well as Fortinet Security Fabric management and analytics. Additionally, the company offers cloud-delivered and hosted-security services. The company’s FortiGuard security services are enabled by FortiGuard Labs, which provides threat research and artificial intelligence capabilities from a cloud network to deliver protection through Core Platform appliance and virtual machine, as well as Fortinet Security Fabric products that are registered by the end-customer. All these are combined to form the Fortinet Security Fabric, which is an approach to security that consolidates discrete security solutions together into an integrated offering. This integrated approach to security extends across both Fortinet-developed solutions and a broad ecosystem of technology partner solutions and technologies.

ASIC

The company’s proprietary FortiASIC technology family consists of three processors. First, a Network Processor Generation 7, FortiNP 7 (NP 7), which accelerates the processing of firewall traffic and offloads this function from the central processing unit (CPU). Second, a Content Processor Generation 9, FortiCP (CP 9), helps the CPU with deep packets inspection functions, such as intrusion prevention and antivirus. Multiple NP7s and CP 9s can be placed in larger firewalls to provide more scale. Third, the central CPU, network processing and content processing functions are all brought together in a single ASIC called the Security Processor Generation 5. These Fortinet Proprietary ASICs, along with off-the-shelf CPU/ASICs, allow the company’s systems to scale from the smallest branch to a hyperscale cloud and run multiple applications at high performance.

FortiOS

FortiOS, its associated security and networking functions and products that run or are integrated with FortiOS are combined to form the Fortinet Security Fabric. This approach to security ties discrete security solutions together into an integrated offering.

The company’s proprietary FortiOS operating system provides the foundation for the operation of Core Platform network security appliances, whether physical, virtual, private- or public-cloud based. The company makes regular enhancements and other updates to FortiOS available through its FortiCare support services.

The convergence of security and networking capabilities provided by the Fortinet Security Fabric are powered and controlled through FortiOS. FortiOS provides multiple layers of security, including a hardened kernel layer providing protection for the Core Platform system; a network security layer, providing security for end-customers’ network infrastructures; and application content protection, providing security for end-customers’ workstations and applications. FortiOS directs the operations of processors and ASICs and provides system management functions such as command line, graphical user interfaces, multiple network and security topology views.

FortiOS also enables advanced, integrated routing and switching, allowing end-customers to deploy Core Platform devices within a wide variety of networks, as well as providing a direct replacement solution option for legacy switching and routing equipment. FortiOS implements a suite of commonly used standards-based routing protocols, as well as network address translation technologies, allowing the Core Platform appliance to integrate and operate in a wide variety of network environments. Additional features include virtual domain capabilities, which can provide support for multiple customers on a single device or FortiOS instance in support of service provider and managed security service provider (MSSP) deployments. FortiOS also provides traffic-logging capabilities for forensic analysis purposes. FortiOS is designed to help control network traffic in order to optimize performance by, including functionality such as packet classification, queue disciplines, policy enforcement, congestion management, WAN optimization and caching.

Products

The company’s core product offerings consist of its Core Platform firewall product family and its Enhanced Platform Technology products, which may be purchased to integrate and expand security architectures. The company’s Enhanced Platform Technology products include the Fortinet Security Fabric, email security, cloud security, endpoint protection and other products. The company’s Core Platform hardware and software licenses are sold with a set of Core Platform broad security services. These security services are enabled by FortiGuard Labs, which provides threat research and artificial intelligence capabilities from a global cloud network to deliver protection services.

Core Platform

Core Platform converges a broad set of security and networking functions, including firewall, intrusion prevention, anti-malware, VPN, application control, web filtering, anti-spam and WAN acceleration. Core Platform is available as a hardware appliance or as a virtual appliance. All Core Platform appliances run on FortiOS. Core Platform platforms can be centrally managed through both embedded web-based and command line interfaces, as well as through FortiManager, which provides a central management architecture for Core Platform appliances and the Fortinet Security Fabric.

With over 35 models in the Core Platform product line, Core Platform is designed to address security requirements for small- to medium-sized businesses, large enterprises and government organizations worldwide.

Most Core Platform hardware appliances include one of the company’s ASICs to accelerate content and network security features implemented within FortiOS. The significant differences between each model are the performance and scalability targets each model is designed to meet, while the security features and associated services offered are common throughout all models. The FortiGate-20 through -90 series models are designed for perimeter protection for small- to medium-sized businesses and enterprises with distributed offices. The FortiGate-100 through -900 series models are designed for perimeter deployment in medium-sized to large enterprise networks. The FortiGate-1000 through -7000 series models deliver high performance and scalable network security functionality for perimeter, data center and hyper-scale data centers, and core deployment in large enterprises. In addition to networking security features, all FortiGate models and form factors also deliver secure SD-WAN capabilities. Fortinet also offers FortiGate Rugged models for OT applications where ruggedized appliances are needed.

The company also incorporates additional technologies within Core Platform appliances that differentiate its solutions, including data leak protection, traffic optimization, SSL inspection, threat vulnerability management and wireless controller technology. In addition to these built-in features, the company offers a full range of wireless access points and controllers, complementing Core Platform appliances with the flexibility of wireless local area network access.

Fortinet Security Fabric and Enhanced Platform Technology Products

As part of the Fortinet Security Fabric, the company offers products that provide network security, endpoint security, cloud security, web-based application security, identity and access management, sandbox protection and email security. The integration of devices using open standards, common operating systems, and unified management platforms enables the sharing and correlation of real-time threat intelligence. The following Fortinet products can operate as part of the Fortinet Security Fabric:

FortiAnalyzer—The company’s FortiAnalyzer family of products provides centralized network logging, analyzing and reporting solutions that securely aggregate content and log data from its Core Platform devices, other Fortinet products and third-party devices.

FortiAP—The company’s FortiAP product family provides secure wireless networking solutions. FortiAPs allow a variety of management options, including from the cloud and directly from its Core Platform firewall product. FortiAPs create a scalable and secure access layer for connecting wireless devices, such as computers, laptops, cell phones and tablets, as well as IoT devices.

FortiClient—The company’s FortiClient provides advanced endpoint protection with pattern-based anti-malware, behavior-based exploit protection, web-filtering and an application firewall. FortiClient integrates with FortiSandbox to detect zero-day threats and custom malware. FortiClient also provides secure remote access with built-in VPN, single-sign-on and two-factor authentication for added security.

FortiEDR/XDR—The company’s FortiEDR/XDR is an endpoint protection solution that provides both machine-learning anti-malware protection and remediation. FortiEDR/XDR supports broad OS coverage workstations, servers, and virtual machines, including legacy operating and embedded systems.

FortiGate VM— FortiGate VM is the company’s network firewall virtual appliance that extends the Fortinet Security Fabric through the cloud on-ramp into the cloud, enabling customers to achieve converged security and networking capabilities networking within the cloud and between clouds and hybrid clouds. FortiGate VM is powered by the same FortiOS that runs FortiGate appliances to deliver consistent security across data centers and the cloud. FortiGate VM is also powered by Fortinet virtualized Application-Specific Integrated Circuits (vASICs) to deliver accelerated security and performance with minimal impact to performance. The company’s cloud networking solution enables better, more secure application experiences for users and branch offices by providing for encrypted data transports, granular segmentation and application-layer protection against advanced threats, and seamless overlay network with uniform policies across multi-clouds. FortiGate VM is available for all major cloud providers, hypervisors and software-defined network (SDN) platforms.

FortiMail—The company’s FortiMail product family provides secure email gateway solutions. FortiMail utilizes the technologies and security services from FortiGuard Labs to deliver protection against threats that use email as an attack vector. FortiMail also integrates data protection capabilities to avoid data loss.

FortiManager—The company’s FortiManager family of products provides a central and scalable management solution for its Core Platform products, including software updates, configuration, policy settings and security updates. FortiManager facilitates the coordination of policy-based provisioning, device configuration and operating system revision management, as well as network security monitoring and device control.

FortiSandbox—The company’s FortiSandbox technology delivers proactive detection and mitigation with the ability to generate a directly actionable protection capability. Available in both hardware and cloud-based form, the FortiSandbox subjects suspicious code to a set of multi-layer protection techniques, culminating in execution within an operating system, allowing real-time behavioral analysis to be performed in a secure environment. When malicious code is identified, a signature can be generated locally for distribution across the Fortinet Security Fabric.

FortiSwitch—The company’s FortiSwitch product family provides secure switching solutions that can be deployed in traditional network switching designs with Layer 2 or Layer 3 access control features. FortiSwitch creates a scalable and secure access layer for customers to connect their end devices, such as computers and laptops, as well as to expand the field of IoT devices.

FortiToken—The company’s FortiToken allows organizations to implement two-factor authentication to better safeguard systems, assets and data. With two-factor authentication, a password is used along with a security token and authentication server to provide seamless yet highly secured access between users and applications. Authorized employees can access company resources safely using a variety of devices, ranging from laptops to mobile phones.

FortiWeb—The company’s FortiWeb product family provides web application firewall solutions, including internet protocol (IP) reputation and anti-botnet security, distributed denial-of-service protection, protocol validation, application attack signatures and deep learning AI to protect applications against a wide range of threats.

The products are available in multiple form factors, such as hardware, virtual machine, cloud or software-as-a-service (SaaS), except for FortiSwitch, FortiAP and FortiExtender, which are available as hardware appliances only and FortiGate VM and FortiEDR/XDR which are available as virtual solutions only.

Services

FortiGuard Security Subscription Services

Security requirements are dynamic due to the constantly changing nature of threats. The company’s FortiGuard security subscription services are designed to deliver threat detection and prevention capabilities to end-customers worldwide as threats evolve. The company’s FortiGuard Labs global threat research team identifies emerging threats, collects threat samples, and replicates, reviews, characterizes and collates attack data through the use of AI, automation and original research. Based on this research, the company develops updates for virus signatures, attack definitions, scanning engines and other security solution components to distribute to end-customers. FortiGuard functionality varies depending on the Core Platform and Enhanced Platform Technology products, and will typically include one or more of the following functions: application control, antivirus, intrusion prevention, web filtering, anti-spam, VPN functions, email image analysis, vulnerability management, database functions, web functions, advanced threat protection, sandboxing and domain and IP reputation services.

End-customers purchase FortiGuard security subscription services in advance, typically with terms of one to five years. The company provide FortiGuard security subscription services 24 hours a day, seven days a week.

FortiCare Technical Support Services

The company’s FortiCare support services portfolio includes technical support, FortiOS updates and extended product warranty. For its standard technical support, its channel partners may provide first-level support to the end-customer. The company also provides first-level support to its end-customers, as well as second- and third-level support as appropriate. The company also provides knowledge management tools and customer self-help portals to help augment its support capabilities in an efficient and scalable manner. The company delivers technical support to partners and end-customers 24 hours a day, seven days a week, through regional technical support centers. In addition to its technical support services, the company offers a range of advanced services, including premium support, professional services and expedited warranty replacement.

Service Bundles

The company also sells FortiGuard and FortiCare services as bundles, consolidating security services into packages that are appropriate for different use cases or end-customers.

Advanced Threat Protection—The company’s Advanced Threat Protection bundle includes antivirus, data sanitation sandbox, intrusion prevention, virus outbreak protection, mobile security, application control, IP reputation and anti-botnet security, along with FortiCare support services.

Unified Threat Protection—The company’s Unified Threat Protection bundle includes the Advanced Threat Protection security services noted above, as well as intrusion prevention, virus outbreak protection, web filtering and FortiCare support services.

Enterprise Protection—The company’s Enterprise Protection bundle includes the Unified Threat Protection services, as well as industrial control systems, security rating, along with enhanced FortiCare support services.

Small Medium Business—The company’s Small Medium Business bundle includes the Unified Threat Protection services, as well as FortiGate Cloud which provides cloud-based management, reporting, and analytics for Core Platforms along with enhanced FortiCare support services.

Professional Services

The company offers professional services to end-customers, including technical account managers (TAMs), resident engineers (REs) and professional service consultants, security architects for implementations and remote, cloud-based incident response (IR).

TAMs and REs are dedicated support engineers available to help identify and eliminate issues before problems arise. Each TAM and RE acts as a single point of contact and customer advocate within Fortinet, offering a deep understanding of its customers’ businesses and security requirements.

The company’s professional services consultants and security architects help to formulate customer-specific security strategies, develop roadmaps for securing digital initiatives and design product deployments. They work closely with end-customers to implement its products according to design, utilizing network analysis tools, traffic simulation software and scripts.

Fortinet also offers remote, cloud-based IR and monitoring services to help customers identify, remediate and understand compromises. This service leverages its FortiEDR capabilities either as part of a premium FortiEDR subscription for continuous monitoring or alternatively, can be deployed to help deliver IR services on a per incident basis.

Training Services

The company offers training services to its end-customers and channel partners through its training team and authorized training partners. The company has also implemented a training certification program, Network Security Expert, to help ensure an understanding of its products and services. Since 2020, Fortinet also offers a number of free online training courses to help address prevalent industry-wide cybersecurity skills gaps and shortages.

Seasonality

The company’s quarterly results reflect a pattern of increased customer buying at year-end, which has positively impacted billings and product revenue activity in the fourth quarter. In the first quarter, the company generally experiences lower sequential customer product buying, followed by an increase in buying in the second and third quarters. On a quarterly basis, the company has usually generated the majority of its product revenue in the final month of each quarter (year ended December 31, 2022) and a significant amount in the last two weeks of each quarter.

Customers

The company typically sells its security solutions to distributors that sell to networking security focused resellers and to service providers and MSSPs, who, in turn, sell products and/or services to end-customers. At times, the company also sells directly to large service providers and major systems integrators who may sell to its end-customers or use its products and services to provide hosted solutions to other enterprises. The company’s end-customers are located in over 100 countries and include small, medium and large enterprises and government organizations across a wide range of industries, including education, financial services, government, healthcare, manufacturing, retail, technology and telecommunications. An end-customer deployment may involve as few as one or as many as thousands of appliances as well as other Fortinet Security Fabric products. Customers may also access its products via the cloud through certain cloud providers such as Amazon Web Services, Google Cloud, IBM Cloud, Microsoft Azure and Oracle Cloud. Often, its customers also purchase its FortiGuard security subscription services and FortiCare technical support services.

Sales and Marketing

The company primarily sells its products and services through a two-tier distribution model. The company sells to distributors that sell to resellers and to service providers and MSSPs, who, in turn, sell products and/or services to end-customers. In certain cases, the company sells directly to large service providers and major systems integrators. The company works with many technology distributors, including Arrow Electronics, Inc., Exclusive, Ingram Micro and TD Synnex (formerly Tech Data Corporation and Synnex Corporation, separately).

The company supports its channel partners with a dedicated team of experienced channel account managers, sales professionals and sales engineers who provide business planning, joint marketing strategy, pre-sales and operational sales support. Additionally, the company’s sales teams help drive and support large enterprise and service provider sales through a direct touch model. The company’s sales professionals and engineers typically work closely with its channel partners and directly engage with large end-customers to address their unique security and deployment requirements. To support its broadly dispersed global channel and end-customer base, the company has sales professionals in over 90 countries around the world.

The company’s marketing strategy focuses on building its brand, driving thought leadership with emphasis on the criticality of cybersecurity platform adoption and the convergence of security and networking, as well as driving end-customer demand for its security solutions. The company uses a combination of internal marketing professionals and a network of regional and global channel partners. The company’s internal marketing organization is responsible for messaging, branding, demand generation, product marketing, channel marketing, partner incentives and promotions, event marketing, digital marketing, communications, analyst relations, public relations and sales enablement. The company focuses its resources on campaigns, programs and activities that can be leveraged by partners worldwide to extend its marketing reach, such as sales tools and collateral, product awards and technical certifications, media engagement, training, regional seminars and conferences, webinars and various other demand-generation activities.

The company intends to continue to make investments in sales and marketing resources, which are critical to support its growth.

Manufacturing and Suppliers

The company outsources the manufacturing of its security appliance products to a variety of contract manufacturers and original design manufacturers. The company’s manufacturing partners include ADLINK Technology, Inc. (ADLINK), IBASE Technology, Inc. (IBASE), Micro-Star International Co. (Micro-Star), Senao Networks, Inc. (Senao), Wistron Corporation (Wistron) and a number of other manufacturers. Approximately 88% of the company’s hardware is manufactured in Taiwan.

The company’s proprietary ASICs, which are key to the performance of its appliances, are built by contract manufacturers including Toshiba America Electronic Components, Inc. (Toshiba America) and Renesas Electronics America, Inc. (Renesas). These contract manufacturers use foundries in Taiwan and Japan operated by either Taiwan Semiconductor Manufacturing Company Limited (TSMC) or by the contract manufacturer itself.

Some of the components important to the company’s business, including certain CPUs from Intel Corporation (Intel) and Advanced Micro Devices, Inc. (AMD), network and wireless chips from Broadcom Inc. (Broadcom), Marvell Technology Group Ltd. (Marvell), Qualcomm Incorporated (Qualcomm) and Intel and memory devices from Intel, Micron Technology (Micron), ADATA Technology Co., Ltd. (ADATA), Toshiba Corporation (Toshiba), Samsung Electronics Co., Ltd. (Samsung), and Western Digital Technologies, Inc. (Western Digital), are available from limited or sole sources of supply.

Intellectual Property

As of December 31, 2022, the company had 1,285 U.S. and foreign-issued patents and 255 pending U.S. and foreign patent applications. The company also licenses software from third parties for inclusion in its products, including open source software and other software.

Competition

Among others, the company’s competitors include Arista Networks, Inc.(Arista); Aruba Networks, Inc.(Aruba), Barracuda Networks, Inc. (Barracuda); Check Point Software Technologies Ltd. (Check Point); Cisco Systems, Inc. (Cisco); CrowdStrike Holdings, Inc. (CrowdStrike); F5 Networks, Inc. (F5 Networks); Huawei Technologies Co., Ltd. (Huawei); Juniper Networks, Inc. (Juniper); Palo Alto Networks, Inc. (Palo Alto Networks); SonicWALL, Inc. (SonicWALL); Sophos Group Plc (Sophos); Trend Micro Incorporated (Trend Micro); VMware, Inc. (VMware); and Zscaler, Inc. (Zscaler).

The company’s competitors include companies, such as Arista, Aruba, Barracuda, Check Point, Cisco, CrowdStrike, F5 Networks, Huawei, Juniper, Palo Alto Networks, SonicWALL, Sophos, Trend Micro, VMware and Zscaler.

History

Fortinet, Inc. was founded in 2000. The company was incorporated in Delaware in 2000.