Mohacsy's Safe Portfolio Member Forum

[Elroy Jetson]

“We’re beginning to notice customers are facing spending fatigue in cybersecurity,” Palo Alto Networks CEO Nikesh Arora said on the company’s conference call. “This is new, as adding incremental point products is not necessarily driving a better security outcome for them. This is driving a greater focus on ROI and total cost of ownership amongst most customers.” - https://www.barrons.com/articles/palo-alto-networks-risky-bet-cd762e15?mod=read_next

“Cyber Security demand continues to be very strong but customers are demanding to get more for the amount of money they have allocated to cybersecurity.”

Palo Alto Network's response is to drive out “best of breed” point players—to expand the company’s share of the CIO’s security software spending wallet. But the company also said that to do that, PANW will allow customers to switch over from competitive products without charging them for the period covered by existing contracts. It would be like switching apartments, and having your new landlord charge no rent until your old lease was completed.

The theory is that multi-product customers tend to be stickier—so the company is willing to take an upfront hit in exchange for potential long-term gain. “We want to march faster to our aspiration to become the Salesforce, to become the ServiceNow or the Workday of cybersecurity,” Arora said. But there will be short-term financial consequences, and potential for increasing price competition.

PANW said there would be a negative impact to revenue over the next 12 to 18 months, with an eventual return to mid-to-high double digit revenue growth.

Citi analyst Fatima Boolani kept her Buy rating on the stock, but cautions that the “platformization” push will “wreak havoc on reported billings,” and will keep “investor heat and skepticism high.”

Some analysts talk about PANW "betting the ranch" but PANW is only betting "missed revenue" for a period of time that revenue almost certainly would not have belonged to them anyway.

PANW offering some free work now without immediate payment, for which they're guestimating some slightly slower income growth than otherwise would have hypothetical. I don't think they're placing much on the table in return for big rewards.

Another good bet. AMD will be unwilling to take a risk to move into a gold leadership AI position, but will continue to accept silver or bronze just as they did for decades with Intel