F5 Networks reported its first quarter fiscal 2013 earnings on Wednesday, showing continued growth in the Application Delivery Networking business. Part of that growth was organic and part was due in no small part to a recent decision from rival vendor Cisco.
For the quarter, F5's revenue was reported at $365.5 million, for a 13 percent year-over-year gain. Net income improved to $69.4 million for the quarter, up from $67.7 million in 2012. Moving forward, F5 provided guidance for the second quarter of fiscal 2013 for revenue in the range of $370 to $380 million.
One of the big areas of growth for F5 is coming by way of competitive replacement for Cisco's ACE (Application Control Engine) technology. Cisco is currently in the process of scaling down its ACE business, which has left the door open for F5 to jump in.
"We had some really good sales in the last quarter when we replaced existing Cisco ACE products with F5 solutions including three ACE replacement winds in Fortune 50 companies," F5 CEO John McAdam said during his company's earnings call. "Our percentage of new business in Q1 was up 6 percent to 46 percent last quarter, driven by ACE replacement winds globally."
Overall McAdam said that it is his belief that there is a real growth opportunity for F5 in replacing the large base of existing Cisco ACE solutions. In addition to the ACE replacement wins that F5 notched during the first quarter, McAdam noted that the pipeline of business for ACE replacement is very strong.
"F5 has a unique and stellar track record of replacing Cisco ADC products in Fortune 500 accounts over the last several years," McAdam said. "The timing of our new ADC platform availability is ideal for us to exploit this opportunity."
While F5's ADC can be seen as a replacement for Cisco ACE in terms of load balancing capabilities, there is more to the story.
"We're not only seeing direct replacement if you will for server load balancing around ACE, but what we’re also seeing is a very rapidly evolving landscape around threats and vulnerabilities that are out there," Manny Rivelo - EVP, Security and Strategic Solutions at F5 said. "So some of these decisions that customers are making are not just to replace the ACE functionality but they’re to bring new functionality into that environment, like IPv6, like protection for DDOS attacks, things that we natively do also in our platforms."
In 2012, F5 began actively positioning its ADC technology for security purposes. The Big-IP portfolio has been certified by ICSA Labs as a firewall since January of 2012.
At the core of F5's technology platforms is the TMOS operating system, which is due for a major refresh in 2013. The new update is codenamed Solar and according to McAdam, is now on track and is meeting the company's development milestones.
"The Solar release ships with approximately 76 new areas of functionality for TMOS including the debut of our advanced application delivery firewall solution," McAdam said.
2013 will also see new hardware that will further expand the growth opportunities for F5 over the course of the year.
"Our goal is to refresh the current product lines with a new range of products that provide significant price performance advantages with increased functionality," McAdam said. "We are now at the initial phase of one of the most significant product line refresh opportunities that we have had in several years."