An Interview With Fortinet’s Founder and CEO

Ken Xie is one of the pioneers of the Internet security business. He founded Netscreen in 1996 to build firewall and virtual private-network products. It was great timing — the Internet was exploding. Juniper (NASDAQ:JNPR) eventually purchased the company for $4 billion.

In 2000, Ken started Fortinet (NASDAQ:FTNT) with a focus on providing broad-based security solutions (known as unified threat management, or UTM). Fortinet went public in 2009.

IPO Playbook had a chance to interview Xie about his company and his IPO experience:

First off, what is Fortinet?

We provide a comprehensive approach to application and network security. This involves firewall, antivirus, web-filtering, intrusion protection, anti-spam and others. As of Dec. 31, 2011, we have shipped more than 850,000 appliances to more than 10,000 channel partners and 125,000 end-customers worldwide, including a majority of the 2011 Fortune Global 100.

An important part of our technology is that it works in real time, which is critical for dealing with security threats. Yet we do not degrade network performance. This has been key in competing against companies such as Cisco (NASDAQ:CSCO), Check Point Software (NASDAQ:CHKP), Intel’s (NASDAQ:INTC) McAfee and Juniper.

What is your target market?

Our revenues are well-diversified. They’re a third from high-end enterprises,  a third from service providers and a third from SMBs.

Why go public?

It was not for the cash. We have been cash-flow positive since 2005.

But we saw an IPO as a branding event. It also was a way to show our strength to our current and potential customers.

We were the first tech company to go public after the financial crisis. The IPO was in mid-November of 2009, and we raised $156 million. The stock was up 33% on the first day of trading and ended the year up 41%. As of now, the return is over 260%.

What about the impact of mobile, such as smartphones and tablets?

We see this as a big opportunity for growth for Fortinet. It means that many more end-points will need to be protected. There never seems to be a recession in the security business.

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “The Complete M&A Handbook”, “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli or reach him via email. As of this writing, he did not own a position in any of the aforementioned securities.