the whole set of videos with partners and customers testimony is really just impressive.
There is a video by GE CTO on the same page on ZScaler Summit.
That ~30 minutes video is really illuminating… GE is their customer since 2012 and saving $30M annual by going to ZScaler for security and in the process removing expensive network, enhancing user experience and achieving much better security…
Interestingly, the losers in this game are of course, network appliances (PANW of the world) but also high priced private network services by telecom companies like AT&T and VZ and CenturyLink (its interesting that ZScaler actually got AT&T to host a party at that summit!!). This will ultimately hurt Cisco and HP and Nokia…
And because they are “in the path of all traffic” of their customers, they can easily replace some of the young companies discussed on this board… specifically OKTA and NEWR. These guys are disrupting multiple disruptors and old incumbents at the same time.
I would think Microsoft gets this well… no wonder Satya Nadella showed up in a video address for ZScalar.
May be i am over thinking
Two major issues i see:
GE CTO mentioned this bold and clear at the end - ZScalar will enable CIOs to reduce the size of team managing corporate networks… these IT networks teams will resist it big time… I think this is why ZScalar will “only grow at double digits and not triple digits on annual basis”
Is that being “the path of their client’s traffic”, ZScaler itself now becomes single point of failure… not sure how they get around that… will need to learn more.
I purposefully just did not look at ZScaler given the crazy multiple it has. 20x!
However, your conversation here piqued my curiosity. I listened to multiple of the talks by third parties, and the future road map, I read through some analyst opinions, and now I am digging into competition (if any real competition therebe).
Thereafter I will look at it again within the valuation/multiple issue (I know Saul does not look into that, and for the correct company that may be wise as I can name MULE that sold for 16x forward revenues, and Mobileye that Intel bought for far more than that, maybe 2x that in forward multiples (being desperate to stay relevant does not hurt)) as such, with the correct company such a forward multiple may be justified.
Not because “this time it is different” but because the smart money, companies using their own money, have proven this to be the case.
If Zscaler beats the current high estimate by 20% (which is probably conservative given the way these forward revenue estimates go) Zscaler will be at ~14x (less than SHOP) but within the realm of best of breed SaaS companies. If Zscaler is singular (as Mobileye was - I made the mistake with Mobileye of LISTENING TO THE ANALYSTS and not Duma - in my defense, I was just starting back in the market after a year or two away from active investing and it took awhile to get my senses back - it really did not feel the same to start - thus I did not use the analyst to my advantage but allowed it to create angst) it is a multiple that may be well deserved.
Yes, Zscaler will be in a position as the central tunnel (as the term “tunnel” is used by the company to refer to its connections to everything) to be the singular point of contact to every communication from email, to website, to application. EVERYTHING!
It is a good perspective to dig into and perhaps better understand this company that one analyst described as not something to understand in a traditional perspective because it is so disruptive.
I have become quite interested but need to finish a deep dive. Dreamer, good instincts on this one. However, you did not miss out on too much not buying right in. The stock opened on its IPO at $27 and is now at $39, around 44% return year to date. Excellent, but not something in the current market that we missed out on. I am going to view it as moving forward from here and the alternatives I may want to invest in.
But yes, there may very well be something quite special here given where Zscaler is in the software stack and that is, Zscaler IS the software stack, as it is everywhere at the edge (part of its disruptive nature).
Thanks Tinker… looking forward to more insight from you and Dreamer and others more knowledgeable folks on this board.
I spent few more hours today because i just couldnt get off the topic…
few interesting points i found.
somewhere i read that they use 100 datacenters around the world… i guess to offer fast, easy access as well… and ofcourse, it can be used to avoid single point of failure that i was talking about in earlier post.
For a company of this size, 100 datacenter claims look too big. I can imagine that their datacenters are either optimized, small center primarily hosting ZScaler SW…
OR they may be just renting some space on public providers like Azure and AWS etc… but with specific connection bandwidth and capacity… and geographic dispersion.
Based on their capex and need to be scalable, i suspect its the latter… but not figured out yet.
Ex CEO of Palo Alto Networks used to be part of the management between 2010 and 2015. That says a lot… ofcourse CEO Jay Chowdhary has tremendous credentials himself.
Looking at IPO filings, CEO owns 27M shares directly and another 30M shares in a family trust. that’s ~50% of the company… and he doesn’t take salary or bonus or equity incentives. Reminds of Ubiquity CEO and may other legendary founder, owner, CEOs.
Pure Storage CEO Charlie Giancarlo is on the board of directors. Joined relatively recently.
Glassdoor is full of glowing reviews with 4.5 rating thats been growing since last six months.
It does look like this one is special…
<<<I don’t understand why any large company would buy this solution. >>>
Morgan Stanley, hardly a small or stupid company just gave Zscaler their award for most disruptive or effective or valuable program enabling Morgan Stanley: https://www.morganstanley.com/press-releases/morgan-stanley-…
I do not have to the talk about the stupid and gullible GE whose CTO gave a speech last month regarding how Zscaler enabled their cloud infrastructure in a manner that no one else could and except for home coded software GE’s move to the cloud would not have been possible.
I doubt with MS or GE failed to think these issues through or fear ZS as the single point of anything.
That is just a truism given the reality of adoption. No company will ever have 100% marketshare or 100% positive reviews but I tend to follow the ones where the CTO of GE, with nothing to sell, takes two days of his time to participate in Zenith convention for ZS. Also where MS, of all their vendors chooses ZS as their most valuable.
Perhaps following such thought leading companies is in error but I weigh those odds as very low that this is the case.
This is the last post I made on this thread with only Dreamer otherwise contributing. I assume he will contribute more later as this is up his alley.
But this final post got to the heart of the matter as we had not talked about SD-Wan. I will let the post speak for itself. It gives us the “why” in regard to Zs, which of course is all important.
Last ER conf call
Zscaler, Inc. (ZS) CEO Jay Chaudhry on Q3 2018 Results - Earnings Call Transcript https://seekingalpha.com/article/4179895?source=ansh $ZS
Old way things were done
“In the traditional architect, organizations built hub and spoke network to backhaul branch office traffic over dedicated wide area networks to the data center in order to apply security checks and access and ports. Then, they built a mode of security appliances that established a perimeter around the corporate network to secure the network. That’s why we call it network security.”
ZS (modern) wsy of doing things
"Our cloud platform eliminates the need for traditional on-prem security appliances that are difficult to maintain and require compromises between security, cost and user experience. Zscaler security cloud is a purpose-built, multi-tenant platform deployed across 100 plus data centers globally that secures access for users and devices to applications and services, regardless of their locations.
Zscaler delivers advanced security and policy enforcements, no matter where the users are, connecting users to the nearest Zscaler data center, hence taking the shortest path to the application. Compute, storage and applications are moving to the cloud, which requires a fundamental change to the network architecture and security. In a cloud and mobile first world where applications are in the cloud and users are everywhere, security needs to be done in the cloud."
One look at TAM
"Based on our analysis, using IDC data, $17.7 billion annually is spent on various security appliances to perform the functions we offer in our platform. Additionally, deploying Zscaler results in reduced spend on bandwidth and network equipment costs.
We believe we are the solution to secure the cloud first mobile first world. "
The 2 main solutions they offer:
“First, Zscaler Internet Access or ZIA for secure and fast access to SaaS applications and the internet. ZIA is designed to ensure malware doesn’t reach the user and valuable corporate data does not leak out.”
“Second, we have Zscaler Private Access or ZPA for secure access to internal applications in enterprise data centers or the public cloud. ZPA connects a specific user to a specific application based on business policy, without bringing the user on the network, resulting in better security while delivering the best user experience. This is how enterprises want to access applications on the public cloud without having to go through their data center.”
Abbreviated, but first Q&A topic asked and answered with a mention of SD-WAN as a key driver of growth acceleration:
“…I’m just wonder if you can maybe put a finer point on what were like the one – or let’s say two to three different factors in the quarter that drove that level of acceleration relative to what we’ve seen in the past few quarters?”
“We’ve got a strong business, we’re seeing good momentum across all our geos. All our geos on a year-over-year basis have increased 45% to 50%. The market we feel is coming to us. We’ve got tailwinds as we talked about before, the Office 365 and SD-WAN. So, it’s a good place to be.”