As companies get more reliant on technologies, the risks increase substantially because of the explosion of security threats. As a result, spending on information technology (IT) security software continues to grow at a hefty rate -- despite the recession.One of the clear beneficiaries is Fortinet, which launched its IPO today. The company issued 12.5 million shares at $12.50 each (the price range was $9 to $11). The underwriters on the deal included Morgan Stanley (MS), JP Morgan (JPM) and Deutsche Bank Securities (DB).
What makes Fortinet different? Keep in mind that the traditional approach to IT security is to implement a variety of different products, like firewalls, filtering, etc. However, this can be expensive and bog down network performance.
So, Fortinet has built a platform that integrates multiple functions in a single application appliance (called FortiGate). In fact, this approach has become known as Unified Threat Management or UTM.
Already, Fortinet has a 15.4% shares of the UTM market. IDC forecasts that the space will grow from $1.3 billion in 2007 to $3.5 billion in 2012. That's an annual growth rate of 22.3%.
As a result, from 2006 to 2008 Fortinet's revenues have spiked from $123.5 million to $211.8 million. The company now has 75,000 end-customers across the world and sells its appliances using a subscription model, which has been helpful in generating strong cash flows ($41.5 million for the first nine months of this year).
Fortinet also has an impressive team. For example, the co-founders -- Ken Xie and CFO Ken Goldman -- were also the masterminds behind NetScreen, which was sold to Juniper Networks (JNPR) in 2004 for $4 billion.
So far in today's trading, the shares of Fortinet are up 36% to $17.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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