Firewall Developer Palo Alto Networks Eyes IPO

Palo Alto Networks, a developer of firewalls for enterprise customers, could be among the next fast-growing venture-backed companies to file for an IPO.

The Santa Clara, Calif.-based company is looking at filing for a public offering, board member Jim Goetz, a partner at Sequoia Capital, told attendees at this week’s IBF Venture Captial Investing Conference, during a panel discussion on security sector investment.

Goetz did not specify a time frame for a potential offering, and the company declined to comment about a possible IPO.

However, in recent months, six-year-old Palo Alto Networks has indicated that is has reached the revenue milestones investors typically look to for companies eyeing the public markets. It was on pace to record sales of more than $100 million last year, according to an Oct. 29 Wall Street Journal article, which said the company was cash-flow positive at the time. For the fiscal year ended July 31, Palo Alto Networks’ revenue was between $60 million and $70 million, according to the article, with revenue up 350% over the previous year. (The company declined to provide updated sales figures.)

Palo Alto Networks also boasts a founding and executive team with a serious track record in network security. Prior to co-founding Palo Alto Networks, Nir Zuk, its chief technology officer and co-founder, was CTO at NetScreen Technologies, a developer of technology for virtual private networks acquired by Juniper Networks in 2004 for $4 billion in stock. Previously, Zuk was a principal engineer at Check Point Software Technologies, and was instrumental in pioneering the first firewall products there in the mid-1990s.

Co-founder and vice president of engineering Rajiv Batra was previously engineering VP at Peribit Networks, a developer of Wide Area Network (WAN) optimization technology acquired by Juniper in 2005 for $337 million. And Chief Financial Officer Michael Lehman was previously CFO and board member at Sun Microsystems.

Palo Alto Networks does not have a CEO currently, according to its website, though it continues to search for one. At present, it has an “Office of the CEO” that manages the day to day business and includes Zuk, Batra, and Lehman.

Since 2005, the company has raised more than $101 million in venture and seed funding, according to Thomson Reuters. Backers include Sequoia Capital, Greylock Partners, Globespan Capital Partners, and JAFCO Ventures.

The company describes itself as a network security company focused on reinventing the firewall. Zuk, during a panel discussion he participated in with Goetz, repeatedly criticized the level of sophistication of firewalls and network security infrastructure most commonly deployed in enterprises today, which he says is woefully outdated.

“We’re using technology developed in the mid-nineties and hoping it’ll protect against the bad guys,” he said.

Applications, the company says on its website, have become the predominant threat vector. But traditional firewalls are unable to identify or effectively control them because they classify traffic based only on ports and protocols, with no information on the specific applications associated with that port and protocol.

Palo Alto Networks says it began shipping its next-generation firewalls in 2007 and to date has installed its technology in more than 4,250 enterprise IT organizations, including a number of Fortune 500 companies.