INTERVIEW-Palo Alto Networks CTO fights viruses he once created

Sat Dec 15, 2012 3:01am IST

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* Zuk founded company in 2005, went public in July

* Shares of Palo Alto Networks are down 10 pct since debut

* Zuk is viewed as an innovator in network cyber security

By Nicola Leske

PALO ALTO, Dec 14 (Reuters) - In fifth grade, Nir Zuk gave himself a virus.

A computer virus, that is.

It was the beginning of the programming whiz's career as a cyber security specialist, where he has gone from a ten-year-old challenging himself to create computer viruses to the co-founder and Chief Technology Officer of security software maker Palo Alto Networks (PANW.N).

"I never let it out in the wild," Zuk says of his youthful viral creation.

Indeed, Zuk, 41, is now one of the major players in the business of keeping businesses safe from cyber attacks.

An Israeli native who worked for that country's military intelligence office as a programmer, Zuk helped create the first commercial firewall at Check Point Software Technologies (CHKP.O). He went on to found Palo Alto Networks in 2005 and took the company public in July.

Palo Alto Networks' shares debuted at $55.15 - compared with an issue price if $42 - but have since fallen by 10.8 percent to $49.78

The company currently holds a roughly 3 percent to 4 percent share of the cyber security market. That's small compared with Cisco's (CSCO.O) 30 percent market share, but Zuk is undaunted by the larger rival's lead.

Cyber security is an $11 billion to $12 billion market, and Zuk said his company can gain market share in the short- and mid-term, though he declined to say how much. But he pointed out that NetScreen Technologies, a firewall manufacturer which was founded in 1998, grew to a market share of around 10 percent by the time it was bought by Juniper Networks in 2003.

"We have a unique technology because from a tech perspective we are several years ahead," Zuk said.

Most analysts don't dispute that claim, saying that Palo Alto Networks changed the firewall market.

With the growth of web services and applications network security, Palo Alto Networks' realized it needed a different firewall approach, employing what is now known as next generation firewalls.

Traditionally firewalls were created when data traffic amounted to emails and web-browsing but they cannot protect from viruses or malware entering via video streaming, file sharing or cloud-hosted applications.

Previously corporations would add products such as intrusion detection to plug the holes in their firewalls. Palo Alto Networks managed to build one device that handled all of the security.

An intrusion detection system monitors computers and networks for signs of invasion and raises an alarm if it detects anything while a firewall aims to prevent intrusions from happening in the first place.

"A lot of companies invested a lot of money in detection and realized it's not enough," Zuk said

"The firewall market was fairly stagnant for a number of years," said Jonathan Ho, a tech analyst at William Blair. "Palo Alto Networks really pushed forward the paradigm shift," he said.

From Zuk's perspective, large vendors like Cisco that offer network security with other products lack the focus needed to lead the way in network security, where the "bad guys are always changing the attacks."

"Hacking is kind of like dating, what you want to achieve is still the same, now you just use different techniques," Zuk quipped.

That's why he is keen to keep the culture of Palo Alto Networks focused on its innovative edge.

"Many companies do not pay attention to culture and I am not talking about a Friday night beer bash," he said, adding that as companies grow "they forget what made them."

"Customers prefer a standalone network security company because of their focus," he said.

Given that, it should come as no surprise that Zuk dismissed the idea of selling Palo Alto Networks and believes the company - and its customers - is better served by staying independent.

(Reporting By Nicola Leske; Editing by Peter Lauria and Tim Dobbyn)

((Nicola.Leske@thomsonreuters.com)(+1 646 223 6134)(Reuters Messaging: nicola.leske.thomsonreuters.com@reuters.net)) Keywords: PALOALTO ZUK/INTERVIEW

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