Tal Liani : Yes. Thank you. I’m going to ask my two questions together, with your permission. The first one is Palo Alto is posting their quarterly call for Friday evening, which is always a bad sign historically for that quarter. And then you are reporting weaker than expected, although you were very positive last quarter. I remember the calls. So does it mean that the environment deteriorated in the last three months? And if the environment deteriorated, what is the source for it? Meaning, is it the backlog drawdown issue that we were concerned with before? Or is it that customers are deciding not to buy, push out? I’m trying to understand the meaning of both you and Palo Alto, two successful companies kind of comments. The second question is, Keith, in your remarks, you said that projects were pushed out.
But if it were pushed out, why do we see a deceleration — continued deceleration into 3Q and 4Q? Because I can back out your 4Q guidance, and billings is declining from 18% to 13% to 11%. And if it was a push out, then we would have seen a recovery in the second half from pushouts from 2Q. So how do you connect your comments about pushouts versus cancellation to the numbers to the guidance? Thanks.
Keith Jensen : Yeah. I’ll go first, and then Ken can talk about what his friend down the street is doing or not doing, to his knowledge. As I kind of alluded to, I’m not — yes, I had pushouts in the quarter. I’m happy with what I saw in terms of July on deals getting closed, but I’ve retained concept of continuing pushouts in Q3 and Q4. I’m not here to suggest that there’s going to be a quarter recovery in that. I think that this is going to be — take a little bit longer through this economy kind of normalizes and this digestion process goes on. So I think it’s really — yes, picking up something in Q3 from Q2, but I’m also anticipating I’m going to see some things move from Q3 to Q4. And also the compares, if you go back and look at in Q3 and Q4 on the billings line, those are pretty attractive numbers that we put up in Q3 and Q4 of last year. What’s he up to?
Ken Xie : I don’t know why Palo Alto is like at Friday afternoon, which is probably — I’m not one want to answer the question. But on the industry, we do see some company, especially large companies, to be more tight on the budget, and also kind of take a little bit long time to closing. It’s not just that this quarter, basically pretty much starting early this year, there is some sign of that one. How long will last? It’s tough to say, but it’s — nearly the security is basically an underspend, then they probably will be starting to go back up after probably a few quarters. On the other side, if you see when the big environment starting kind of tough or tight, they tend to be more hand on the current product, current solution and then buy more service, which we also try to help new customers net whatever they have on hand to offer more service, like the SD-WAN service we announced today.
So, let’s see, the service revenue starting kind of doing well, leverage or kind of the last few years. The product revenue growth, which we already be the #1 in the product revenue in the whole network security space, which is over 28% market share, and also unit shipment is over 52% market share. So I think we’ll continue to keep leading in the space and with new technology solutions, like the FortiGate 90G we announced today. But it’s — for us, more focused on long term. So we do believe the long-term convergence of network to network security, we feel we have the best technology product to meet that challenge. And at the same time, the short-term environment, we tend to be also see as an opportunity to keep gaining market share.
Tal Liani : Got it. It’s — can you talk about — I know you don’t provide backlog, but can you talk about the backlog trends and how much of what we’re seeing last quarter, this quarter, next quarter is still supported by backlog versus the environment itself? We are all looking through this. The question is whether first half of ’24, for example, we can get to single-digit growth instead of the double digits? You talk about the end of the year. So I’m not asking you for guidance for first half, but trying to understand how much of current trends are supported by backlog.
Ken Xie : Yeah, the backlogs are already back to normal now, back to that before the supply chain issue. And you can see last year towards the middle to the end, we already see the FortiGate. We already solved the issue. The majority of most of that will come from some network-related products. That’s also been eased up in the first half of this year. Backlog kind of back to normal before the supply chain addition. And they do have certain cancellation. Ideally the cancellation, probably double digit?
