What's Happening With Palo Alto Resellers?

Palo Alto Networks Inc (NYSE: PANW) delivered a second-quarter miss and reduced its guidance. Discussions with reseller partners indicate healthy pipeline and win rates, while the market seems to have matured and competition has intensified, Wunderlich’s Bill Choi said in a report.

While maintaining a Hold rating and a price target of $150 for the company, Choi mentioned investor concerns exist regarding the lengthening duration of new subscriptions and support contracts.

Pipeline Healthy

Interviews with some reseller partners indicate a healthy pipeline of deals worth more than $1 million with existing customers. Although deal conversions are progressing well, the market is maturing and network security vendors are increasingly adopting bundling strategies, which may result in large deals but could take longer to close, Choi noted.

Related Link: Palo Alto: Down, But Not Out

New Subscription, Support Contracts Lengthening

Palo Alto’s contract duration has increased from 2.7 years to three years. “We believe the adoption of enterprise license & support agreements (ELAs/ESAs) by larger customers may be a contributor,” the analyst wrote.

Endpoints Discouraging

“Resellers remain mostly negative on Traps, despite PANW pointing to ~175 new customers in Q2 to 875 with increasing deal size,” Choi stated. Although Palo Alto may have benefited from the recent spending focus on endpoints, Traps seems to be “missing from the large deals.” While there are more seven-figure opportunities in endpoints, these are being won by startups CrowdStrike, Carbon Black and Cylance.