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Palo Alto Networks Prices IPO Above Range, $2.8 Billion Valuation

Palo Alto Networks IPO Prices Above Range, Company Rasies $260 Million at $2.8 Billion Valuation

Set to start trading Friday as the network security firm makes its debut as a public company, Palo Alto Networks said Thursday that it would be offering up 6.2 million shares of its common stock at a price of $42.00 per share, topping the $38 to $40 per share range set earlier this week, and significantly higher than the $34 to $37 per share range that the company originally set.

A price of $42 per share puts roughly $260 million in the company’s pocket and would value the maker of next generation firewalls at a whopping $2.8 billion.

Earlier this week, SecurityWeek spoke with Scott Sweet, Senior Managing Partner at IPO Boutique, an IPO and secondary advisory services firm about the upcoming IPO.

Palo Alto Networks Company HQ

“Demand is considered, in the business, as exponentially oversubscribed,” Sweet told SecurityWeek on Wednesday. “This means there is multiple times more demand than supply.”

“There is no doubt that based upon the tremendous numbers and growth Palo Alto Networks has put out, of all these [tech] companies that have [had an IPO] this year and have done extremely well, it’s very likely that this is the best of the bunch,” Sweet said.

The $42 per share price tag values the company at about 13 times sales of $220 million that the company had in the 12 months ending April 30. According to Bloomberg data, this valuation is roughly double the average multiple of 6.4 for similar-sized competitors including Juniper Networks and Check Point Software Technologies.

Despite the fact that the company coined the term “Next Generation Firewall” and is considered to be a disruptive innovator in the security space, other security firms have followed with their own NGFW’s and competitive offerings, including products from Sourcefire, Cisco, Check Point, Fortinet, SonicWALL (recently acquired by Dell), WatchGuard and others.

Leading up to the coming IPO, Palo Alto Networks has raised approximately $64 Million, with the most recent round taking place in 2008.

In August 2011, the company hired former VeriSign CEO, Marñk D. McLaughlin, to take the reigns as president and CEO.

 According to IDC’s Worldwide Quarterly Security Appliance Tracker, factory revenue and unit shipments for security appliances both grew in the first quarter of 2012, marking the eighth consecutive quarter of year-over-year growth. The Firewall/VPN segment saw the largest year-over-year revenue growth at 23.3% and accounted for 28.3% of the overall security appliance market during the quarter.

Shares are expected to begin trading today on the New York Stock Exchange under the symbol “PANW”.

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For more than 10 years, Mike Lennon has been closely monitoring the threat landscape and analyzing trends in the National Security and enterprise cybersecurity space. In his role at SecurityWeek, he oversees the editorial direction of the publication and is the Director of several leading security industry conferences around the world.