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Fortinet rallies on Q4 beat, guidance; other security stocks also outperform

  • In addition to beating Q4 estimates, Fortinet (FTNT +2.9%) guided for Q1 revenue of $155M-$159M (+16% Y/Y and largely above a $155.2M consensus) and billings of $168M-$173M (+15% Y/Y). EPS, pressured by aggressive sales hiring, is expected to come in at $0.08, below a $0.12 consensus.
  • Several other security hardware and software names are also outperforming on a strong day for tech stocks. PANW +5.9%. IMPV +3.8%. PFPT +4.8%. CUDA +6.3%. QLYS +6.5%. The gains come even though security software giant Symantec (has been losing share) is selling off after providing soft March quarter guidance.
  • Fortinet produced billings and free cash flow of $684M and $134M in 2013, well above revenue and net income of $684M and $81M. A major reason: the company's deferred revenue balance rose 19% Y/Y to $433M.
  • 37 $500K+ deals were signed in Q4, up from 27 a year earlier. At the same time, Fortinet saw a notable mix shift towards cheaper hardware: 41% of all sales of Fortinet's flagship FortiGate unified threat management platform involved entry-level products in Q4, up from 34% a year earlier. High-end products fell to 30% of sales from 36%.
  • CC transcript, earnings slides

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