November 9, 2000

Ten Fast Facts: Watchguard Technologies Inc.

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Watchguard Technologies Inc.

WHO:
A publicly traded Internet security company founded in 1996 by Christopher Slatt and Steve Moore

WHAT:
Produces the Firebox, a security appliance, and offers the LiveSecurity Service, a Web-based feature

WHERE:
Seattle

Fast Fact #1: WatchGuard recently moved its headquarters into the 505 Union Station building.

Comment: The 180 employees now occupy two floors in the 11-story tower, which was built by Paul Allen. The sleek, spacious offices are quite a contrast to the cramped conditions of WatchGuard's original home in Pioneer Square, says Mike Martucci, vice president for marketing. "Our desks were like two sawhorses and a piece of wood," he says.

Watchguard


Fast Fact #2: Staff meetings often take place in France.

Comment: Employees also gather in Mexico, Italy and Japan. That's because the company's conference rooms are named after countries. Why? "I don't know," says Martucci. There's also a therapy room. "It must be broken," says Martucci, "because I went in there and I didn't feel any better."


Fast Fact #3: WatchGuard recently broke the profitability barrier.

Comment: Net income for the first nine months of 2000 was $21,000 compared to a net loss of $8.8 million during the same period last year. Revenues were $40.8 million compared to $14.1 million. The company is the number two Internet security company in the world behind Check Point Software Technologies, says Martucci.


Fast Fact #4: The dot-gone phenom hasn't hurt WatchGuard.

Comment: That's because nearly all companies, not just e-businesses, have Web sites and they all need Internet security, says Martucci. "They don't want their Web sites defaced. They don't want them changed. And they don't want them to be the pathway into their corporate network." Watchguard, which went public at $13 a share in 1999, peaked at $125 a share and now trades in the $50 range.


Fast Fact #5: WatchGuard targets small and mid-size businesses.

Comment: When it comes to serving Fortune 500 companies, Check Point Software has long been the leader, says Martucci. But that's not the market WatchGuard's owners staked out. "They felt the real growth was going to be the swell of small companies that were going to adopt the Internet as a way of doing business." And while Check Point's products might be "awesome," they also are costly and complex, says Martucci.   


Fast Fact #6: Fireboxes are the core of WatchGuard's multi-facted LiveSecurity System.

Comment: Simplicity is their shining feature, says Martucci. "You buy them. You plug them in," he says. The bright red appliances  come in a variety of models depending on their capacity and optional features. Most resemble a VCR. Different versions can support 50, 500 or 5,000 users, selling for between $5,000 and $13,000. Two models, intended for five users or less, resemble a portable CD player. They sell for $499 and $599 each.


Fast Fact #7: A Firebox acts like a traffic cop patrolling the road between the Internet and a company's servers.

Comment: "It decides who's allowed into your network based on the rules you set up," says Martucci. Setting the rules is a relatively simple process of using the WatchGuard Control Center to click on red, green and yellow lights governing various access scenarios. The control center also provides monitoring and reporting tools. Fireboxes are powered by WatchGuard's Security Suite software. Besides enabling Fireboxes to accomplish their primary mission, the Security Suite streamlines the process of setting up virtual private networks.


Fast Fact #8: Customers also can subscribe to WatchGuard's LiveSecurity Service.

Comment: The Web-based service, which costs $49.95 a month, ensures Fireboxes remain up-to-date and effective against the latest security threats. WatchGuard security experts monitor potential threats and e-mail warnings to subscribers. If a threat appears serious, a rapid response team swings into action, developing counter-measures and sending them to subscribers within 24 hours. 


Fast Fact #9: WatchGuard recently bought Qiave Technologies.

Comments: Qiave's QSecure software thwarts internal hackers as well as any external hackers who penetrate the organization's perimeter security. By acquiring Qiave for 1.29 million shares of common stock worth $66 million, WatchGuard can now offer its customers an even more complete solution, says Martucci.


Fast Fact #10: WatchGuard is forming partnerships with computer makers.

Comment: Dell, Compaq and NEC will integrate WatchGuard software into their personal computers, eliminating the need for a separate Firebox appliance. The deals give WatchGuard new distribution channels. The company will cash in by charging computer buyers a fee to activate the software's various features.



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