Saket Kalia: It was just on the three segments, right, secure networking, SASE, and SecOps. It was helpful to get sort of the growth ranges for this quarter. Not going to hold you to it, but how do you think about sort of the relative growth rates for those three segments this year?
Keith Jensen: And maybe I’ll answer that in the context of average contract term or duration, because I know there’s a lot of concern or questions have been raised about, will that shorten the contract term? And you heard the data that we gave during the call. These two segments, we have a business that basically runs on average contract terms. We call it two years, two and a quarter, if you will. A SASE and SecOps business mix would probably be billing one year in advance when you look at the competitors and so forth. So that kind of gives you the range. It’s going to take a while for SASE and SecOps to really impact that contract term or duration. And I think the read-through to that in terms of, we’re excited about the opportunity with SASE and SecOps. If we have outsized growth there, we’ll be very pleased with it. But I don’t know that we’re hanging our head on something completely out of the realm of reality, if you will, for 2024 for SASE or SecOps.
Ken Xie: Yes, for the three segments, I don’t have the latest market data, but from Q3, the firewall market is kind of flat here. Q4, we probably will read out company reporting. But we do see probably still under some pressure this year, especially the first half of this year. But I do believe the long-term converging story will hold quite well because the company also needs to manage the kind of application level, which is how to use network security to do that. So that’s where long-term we do see the firewall market or the network security market will continue to grow, I feel, probably around 10% year-over-year in the next maybe three to five years. SASE and SecOps come from maybe smaller base, which also grow faster. And we also have a lot of existing customers.
I want to adopt all this together with us. They probably already are firewall customers, D1 customers. They can easily adopt additional solutions, additional products. So that’s where we see the other two sectors grow faster than the company average and probably continue to grow faster in the next few quarters.
Saket Kalia: Very helpful. Thanks, guys.
Operator: Thank you. Our next question will come from the line of Andrew Nowinski with Wells Fargo.
Andrew Nowinski: Great. Thank you for taking the questions. So I was just wondering if you could, and we’ve talked a lot about your other pillars. I was wondering if we could touch on SecOps and maybe what’s driving that. Is that related to the recent SEC regulation? And then second, I was wondering if you look at your billing guidance for the year, where do you see the most risk as it relates to that guidance in terms of the three pillars and the performance you’re expecting from those three pillars?
Ken Xie: Yes, the SecOps is actually helping customers more like better security and more efficient and also lower the total management costs. That’s where I need to have multiple solutions, multiple products integrated together, automated together. So that’s what we see in the current environment of our company. And because small, they do see the SecOps already. The area they probably work on the investment there. And also we do see the merging of networking and security together, which also SecOps plays a quite important role to make sure the two operations can be operated together, which we are needing in this area. So that’s where SecOps, we see pretty strong growth. SASE is more like consumption model. We also see kind of fit the current environment well. Even the cost could be a little bit higher than the appliance. But it gives the customer flexibility. And so that’s where we see that. John, you want to answer?
John Whittle: Yes, and I think for SecOps, what we’re seeing is the threat landscape out there is driving a lot of the customer behavior as well. You see these ransomware attacks that are really debilitating to customers. And so prevention is important, but time to detection and time to remediation is critical. And it’s real money. And these are really important issues for our customers. And also I would note, we’ve really been building this solution over many, many years. But we really just started to focus on it as a separate pillar three months ago. And then we had a record Q4. And so I think that degree of focus internally coupled with how we can actually help our customers, putting our customers first, really is driving a lot of the success there. And that new focus, we’re pretty much sticking to the plan. The plan’s working. We’re sticking to the plan. And so we see a lot of opportunity there.
Operator: Thank you. Our next question will come from the line of Brad Zelnick with Deutsche Bank.
Brad Zelnick: Great. Thank you so much. I think I’ve got one for John Whittle and one for Keith. First, just for you, John, given your recent appointment as Fortinet’s first ever COO, can you talk about your perspective stepping into the role and how you plan to help drive Fortinet’s business forward? And Keith, for you, in your guidance comments, you said for the full year that you expect the selling environment to improve in the back half and into 2025. And I’m not saying I disagree with you, but I’m just curious why you say that. And if it’s just relative to the comments that you also made on the firewall cycle dynamics or if it’s something else, more broadly in the economy that you’re expecting. Thanks.
John Whittle: Thanks for the question. I’m really excited about the role. I’ve been working here for 17 years through a lot of growth, and my focus over those 17 years has really been learning from Ken and Michael and the team. And it’s like an MBA on steroids. They’re brilliant business people in addition to focusing on the innovation and the technology, which I think is a core differentiator for Fortinet. We are an innovation-first company. And I think our culture is really around what I call almost a straightforward baritocracy. And Ken and Michael drive this throughout the organization. It’s very straightforward. It’s work hard, work smart, innovate and put the customer first and deliver results. And so I really like the culture.
Obviously, I’ve been here 17 years. Some people say I need to get more creative with my career, but I really – it really gets me excited to make a difference. And it’s a positive difference. We’re protecting our customers so they can get about their business. So I really like that. And in terms of how I can contribute, up until now I’ve focused on legal and corp dev. I’m taking over corporate real estate. I’m adding systems, manufacturing and logistics. And so I have a broad set of responsibilities. I also have always worked very closely with the sales teams. I will not be managing the sales teams, but I will continue to work closely. Teamwork is one of our top three culture items here. And we’re not really boxed in here in a way. In a way, we really work together.
And so we’ve got great sales leaders, and I look forward to working with them. We’ve got a huge opportunity to grow. We want to grow and capture that opportunity by putting the customer first. I want to support that. And to the extent I can help the team, I want to do that. To Fatima’s question earlier, we’re also very disciplined on the cost side. And as Keith said, we have this services model where we have a lot of visibility based on the deferred revenue on the top line. But we also are very disciplined at kind of managing and monitoring the costs on a real-time basis. And, sometimes you can control the costs, more quickly than other things. And so what I’ve noticed is, we’re very good at kind of managing that on a real-time basis, and we’ll continue to do that as well.
Brad Zelnick: Welcome, John.
John Whittle: Thank you.
Ken Xie: Thank you, John. And John also helped us form the company culture in the very beginning, which is the teamwork and also openness and also innovation. So we’ll continue to maintain this culture and keep growing the company together.
Keith Jensen: And then quickly, Brad, on the other – I mean, yes, obviously, the view of the firewall cycles has some part of it. But I think probably more of the point is the digestion of products and projects. And if you look back at where the peak was of firewall purchasing and you kind of play that out, you should be coming to a logical end of deployment cycles.
Brad Zelnick: Great. Thank you, guys.
Operator: Thank you. Our next question will come from the line of Keith Bachman with BMO.
Keith Bachman: Hi. Many thanks. And Peter and Keith, thank you again for the disclosures on the segments within billings. It’s very helpful. Two questions. One is on strategy and one is on guidance. Ken, on the strategy question, I wanted to ask you on your perspective on the Unified SASE, excluding SD-WAN and SecOps. There’s two broad variables that I think about. One is go-to-market and one is product or R&D. You’ve clearly increased the go-to-market efforts surrounding unified SASE and SecOps. I’m wondering, do you feel the need to also incrementally focus on the product side or incremental R&D, if you will, to strengthen the portfolio for things such as improving your positioning within the Gardner Magic Quadrant or however you want to think about it.
So is it more go-to-market that you think incremental efforts or it’s both incremental, both the R&D side and as well as the go-to-market? And just in the interest of time, I’ll ask my second question. Keith, on the guidance, given the performance in the quarter, and I’m really focused on the year, not the March quarter, it does seem very conservative. You very much outperformed your expectations associated with the December quarter. And you’re guiding for kind of 2%. And even if you normalize for the backlog burn, you’re sort of mid-single digits, maybe a little bit better than that. And so I guess I’m just trying to reconcile that it seems like very conservative guidance. And perhaps the way to ask the question is, how do you think about the product side as we get to the back half of the year?
