Ken Xie: We do believe in this fast-growing SASE SecOps market, the sales training, sales restructuring. At the same time, more efficient marketing is very, very important. And also, we are continue working closely with our channel partner with our distribution network to reaching more broad customer base. So we’re also thinking the large cross-sell opportunity is huge and especially go through our partner network there. So I don’t feel the investment we’ve made in the past will be any issue or kind of any slow us down. We do believe we are actually helping us to expand in this more service basis SASE market and also more consolidation secure approach.
Keith Jensen: Yes. And I would just build on Ken’s comment, Brad and all good and fair questions. It’s not by accident. We’re talking about SASE. If you go back and think about it a little bit, we’ve been talking about it and in a number of different ways, Ken has talked about the PoP strategy which now you see us accelerating that PoP strategy with the cloud providers to come to market more quickly. The Gartner Magic Quadrant, I think, of the catalyst for the single vendor strategy and having us in the challenger quadrant gives us the bonafides if you will, to have a lot of conversations. The single vendor strategy, that installed base that you referred to, we went back and looked over the last 2 quarters, we’ve done several hundred SASE deals already.
And to be quite honest, that was without any real wood behind the arrow in terms of marketing support and sales support. It was really just how it grew. And it’s interesting. I would have expected those first sales that would have been clearly dominated by SD-WAN. They were not SD-WAN customers. They were often times, there were just as many brand new customers coming to us for the SASE solution as they were SD-WAN customers or somewhere and at the third part of the pie were customers that are bars for other firewall use cases. So, I don’t — in the expectation that our — we’re going to be successful initially in the smaller part of the market. I don’t think we disagree with that. When I look at that same mix of SASE customers, nearly 50% of those SASE customers that we signed already would be in the SMB space.
And then, the remainder was kind of divided up between the larger enterprises and the mid-enterprise. So, I don’t think we got here by accident. We maybe just not to talk about it publicly but I think we’re well positioned now because of the investments that we’ve made in the data centers, the PoPs, the operating system like Gartner Magic Quadrant, the fact in a single vendor in the installed base. I think this is the right strategic shift for us to make at this point.
Brad Zelnick: And just a quick follow-up and I know it’s a topic we’ve spoken about in the past. But as SASE increases as part of the mix? And I know strategically, you’ve partnered with Google to help deliver the infrastructure. How should we think about the CapEx required to do this in a competitive way over the longer term?
Ken Xie: We do have a good partnership with Google. At the same time, some other service providers like digital royalty. And we also built some of our own like data center PoP over 30 owned by ourself which has really given us a more cost advantage. So we’re containing that strategy but as do need time to ramp up. So Google is a very quick solution for us, for customers. And also, we feel we separate — we kind of realign the market into 3 different segments. Secure networking, SASE and SecureOp is much clearer, much better lineup with the customer need and also with different customer demand. So that’s much better, more clear compared to the previous one we have whether the FortiGate or some other like enhanced non-FortiGate product.
We feel this is a clear 3 segment line up quite well with the customer demand. So we’re starting tracking based on this one, also we started compensate sales and the train sales and marketing along these 3 separate segments of the market. That will be more clearly to us internal for customers to a partner to very kind of drive what customers really need in the current environment.
Keith Jensen: To Ken’s point, look, we were — last quarter, we were talking about 20 PoPs because we’re building them ourselves, right? Now you’re talking about over 100 locations, well over 100 locations. So I think there’s a go-to-market opportunity there that this brings to us. I think longer term — and we know that one of our competitors, this is the approach they take and we have pretty good visibility, obviously, to what their margins are and their investments there. And there’s another player in the space that’s much more building their own PoPs, if you will. PoPs individually are not huge things, right? I mean they are single-digit number of racks that really have a PoP, I think. So I do believe you need some forward-stage data centers.
And I think that’s consistent with our strategy that we’ve talked about, about increasing more and more hosted delivery services and particularly in SecOps. So I think this is not something that we’re going to surprise people with in terms of our CapEx spending.
Operator: Our next question comes from Adam Tindle from Raymond James.
Adam Tindle: Keith, it sounds like you’re confident in profitability and free cash flow which makes sense. Obviously, the model has proved itself over the years. So I wanted to ask about capital allocation. The balance sheet is already very healthy. You’ve got a lot of capacity. Right now, the market is pivoting towards universal SASE and SecOps, as you mentioned. Curious how the conversations have gone internally to potentially accelerate your pivot towards that with larger M&A. And conversely, if we look at the after-hours action here, the ROI on share repurchase is looking potentially very strong the opportunity to potential step up share repurchases? Just in general, how you’re thinking about using the balance sheet as a weapon during a time where the business and stock is pressured?
Keith Jensen: Yes. I think we included a comment in the — in my prepared remarks that the available — we still have — as of the start of the month, start of the week, I guess, we had $980 million of available authorization for the buyback. And I think you saw some of the numbers that we provided in the prepared remarks about being fairly aggressive during the quarter itself as well in terms of buying back stock. Canada so let me go shopping for companies very often. So I’ll defer to him in terms of his thoughts on that.
Ken Xie: We’re definitely keeping looking. I think right now, the multiple probably more reasonable than the last 1 to 2 years. And also, we do realize the marketing also changing pretty quick. We’ll continue to do the internal innovation. We feel we are the strongest on the internal innovation engineering among all the space, player. But on the same time, we also were open to looking for some other companies which we can work together, join together.
