Barracuda, FireEye, and Fortinet Hurt HACK in October
Research and development
Fortinet (FTNT) spent $42.1 million on research and development (or R&D) in 3Q15, a 36.8% YoY (year-over-year) increase compared to R&D spending of $30.79 million in 2Q15. For the nine months ended September 30, 2015, R&D expenditure rose 28.4% from $89.8 million in 2014 to $115.31 in 2015.
R&D is a major component in terms of expenditure for firms in the tech space. As mentioned in part three of this series, tech heavyweights Intel (INTC) and Qualcomm (QCOM) spent approximately $11 billion and $5.5 billion, respectively, on R&D in 2014.
Billings increased 41% YoY
Total billings for 3Q15 rose 41% YoY (year-over-year) to $299.6 million to $213.2 million in 3Q14. Total deferred revenue as of September 30, 2015, was $706.9 million, an increase of $49.4 million compared to $657.6 million as of June 30, 2015. Cash, cash equivalents, and investments as of September 30, 2015, were $1.17 billion compared to $1.15 billion as of June 30, 2015. In 3Q15, cash flow from operations was $65.1 million compared to $56.5 million in 3Q14. Free cash flow increased as well to $51.7 million in 3Q15 from $50.7 million in 3Q14.
Gross margin for Fortinet in 3Q15 was 72.4% compared to 71.0% in 2Q15 and 70.6% in 3Q14. Operating margin for the firm was -0.71% in 3Q15 compared to 1.23% in 2Q15 and 8.0% in 3Q14. In contrast, net margin for FireEye was 3.1% in 3Q15 compared to 0.33% in 2Q15 and 2.1% in 3Q14.
Fortinet makes up 4.8% of the PureFunds ISE Cyber Security ETF (HACK) and 0.07% of the iShares Russell Midcap ETF (IWR).
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