Focused on the application delivery infrastructure for IP-based software. By being the intelligent link between the application and the network they can optimize for performance, availability and security.
Believes current high growth will continue throughout 2007. From competitive standpoint the familiar Gartner Group grid for application delivery shows F5 as the clear leader. Citrix is the only other company in the upper quadrant with NetScaler. Cisco, Juniper, Akamai are major players but well outside the leaders quadrant. [Note the Gartner chart was dated December 2005 and there has been some movement since then.]
Beyond simple load balancing F5 has very large market share (60%). Server load balancing is likely to shrink as WAN optimization and Application Delivery Controller platforms will come to dominate the Application Acceleration market by CY08. (Again per Gartner Group.)
The two layers between intelligent clients and back end solutions are the network layer (routers, switches, firewalls) and the application layer (shaping, caching, compression, encryption, SSL acceleration and so on.) F5 took the opportunity to combine these features to streamline applications and improve performance.
They have brought out the Traffic Management Operating System (TMOS) which combines a broad range of functions with the iRules control language, iControl API system and developer toolkits.
A broad range of core products scales up from $15,000 to just over $100,000 per switch. Some additional boxes include a remote access solution (FirePass) and specific security threats (TrafficShield). Two small products are focused on WAN optimation and acceleration and came through a recent acquisition. [Seems like more of a distraction but now the software can be added to their core platform.]
Today their solution is very strong except for when there are a large number of branch offices. They expect to improve their capabilities by incorporating more features into their core platform by this summer. Their new high end product BIG-IP 8800 (10G L4, 6G L7, 6G SSL, 6G Compression) will generate revenue this quarter.
Financial results have been nearly perfect the last 16 quarters. Gross margins have been flat at 77-78%. Deferred revenues have grown every quarter and now stand at $60M. Cash from operations has been good but a little volatile, especially last quarter. However in the current quarter the company is guiding for strong CFOPS of over $30M compared to $18M last quarter.
Given that Q1 guidance is slightly up from the recent Q4 the company expects to be off to a strong start and should post another great year of results in 2007.
Doesn’t think the WAN optimization market is a huge long-term opportunity but does think the application delivery controller platform is.
When asked about Citrix/NetScaler they feel they were at a disadvantage against them at first but that Citrix didn’t really take advantage of it. When TMOS came out the tables were turned and F5 was in the better position. NetScaler is a decent product and fits into the middle of the range. F5 often wins by showing a product breadth and roadmap that goes well beyond what Citrix can delivery; in part because they have no expertise in ASIC design and high-performance solutions.
F5 relies pretty heavily on channel partners. There are 550-600 world-wide with quite a few large players reselling F5 as part of an overall solution.