F5 Targets Government Web Opportunities

By Marianne Dunn, Staff Writer




Just three months after its initial public offering, F5 Networks Inc. is ready to make a bigger splash in the government market.

The Seattle-based provider of Internet traffic management products plans to use the cash and credibility it gained from a stock that opened June 4 at $10, hit a high of $85 in July and has not dipped below offering price, said Ken Brown, federal sales director.

The four employees in the company's Laurel, Md., office are dedicated to federal sales and will be joined by at least three more employees in the next few months, said Brown.

The company was founded in 1996 by Jeffrey Hussey, a former vice president with Alexander Hutton Capital LLC, an investment firm. F5 is named after the term meteorologists use to describe winds of the highest force. According to Marc Goodman, senior director of marketing, so far the company is living up to its name. Revenue was $229,000 in 1997, shot to $4.9 million in 1998, and so far this year it is $14 million, he said.

Eight months after establishing a sales and support team to focus on the federal market, 5 percent of company revenue comes from government business, said Goodman. Contracts from the military and intelligence agencies make up 70 percent of that business. The remaining 30 percent comes from civilian agencies, he said.

Brown said Steve Goldman, senior vice president of sales and marketing, had long intended to target the federal marketplace. His plan was to establish a commercial business model first, and based on the success of that model, expand into the federal and international markets, Brown said.

Erik Suppiger, an analyst with Hambrecht & Quist in San Francisco, said the company is in a good position to pull in a significant amount of business from both the public and private sectors and has "tremendous momentum ... because they have a very competitive product."

F5 's flagship product is BIG/ip, which the company describes as a high-availability and intelligent load-balancing appliance that distributes user requests across server and network device arrays, regardless of platform, without requiring that additional software be installed on the servers.

Its 3DNS product works with BIG/ip software to allow incoming client requests for Web, e-mail, database and other TCP/IP applications to be routed transparently to the most available server in any geographic location.

Because of the many federal Web sites, "the government represents an attractive market opportunity for them," said Suppiger.

F5 tested the public sector market in October 1998 when it worked with Hewlett-Packard, Palo Alto, Calif., and PSINet, Herndon, Va., on a NASA project to host shuttle.nasa.gov, the site chronicling former Sen. John Glenn's return to space. Hewlett-Packard contributed the servers, and PSINet provided software that included F5's BIG/ip controller and 3DNS controller, earning the company about $125,000 in revenue and "an incredible success story," Brown said.

NASA wanted software to prevent the sort of system failure that plagued the space agency's Web coverage of Pathfinder's landing on Mars. Brown said F5 software overcame those problems.

"The system was designed to handle 160 million hits in the first day, and we had 128 million hits without an error," said Brown. "We sustained 90 million hits during the four days of the shuttle mission without a single failure."

Suppiger said F5's next challenge is to compete against industry giant Cisco Systems Inc. of San Jose, Calif., which "has phenomenal marketing clout. Suppiger said F5's product is superior and that the company has a good distribution system.

Brown said F5's three-tiered distribution strategy is to provide expertise to the end user, work with value-added resellers that are targeting network- and security-centric applications and work with government contractors that want "our type of technology to augment their solution sets."

For example, F5 partnered with Federal Data Corp. of Greenbelt, Md., on a Government Printing Office project. The companies supported the GPO Web site when the Independent Counsel Kenneth Starr's report on President Clinton and former White House intern Monica Lewinsky was issued, a contract worth about $75,000 to F5.

"Federal Data provided contract vehicle and expertise for service, and we provided the hardware and software and configurations and sizing," said Brown. "BIG/ip was installed on the database and now front ends all GPO Web publications."

Brown said the company is beginning to work with major integrators such as Litton-PRC Inc. of McLean, Va., Unisys Corp. of Blue Bell, Pa., and Science Applications International Corp. of San Diego. Because these are young partnerships and no deals have been finalized, Brown did not go into details about pending projects.

As F5 tries to establish itself as a key provider of Internet traffic management, Brown said the company is looking for the next opportunity. "The next issue we see happening with the government is the service to the citizen," he said.

As Americans become more comfortable with using the Internet and e-commerce, he said, this type of technology will allow the average citizen to get the same level of responsiveness from the government that they get from the commercial sector.

Brown predicted F5 would remain a strong force in the online market, unlike other public Internet-based companies that he said create confusion because they do not differentiate themselves to the public. F5 is an Internet company in that it supports other online businesses and government sites, he said.

"F5 is an Internet-based company, but we are not a .com. We are an infrastructure company," said Brown. "We are a company that keeps the .com on."Headquarters: Seattle

Business: Internet traffic management

Founded: 1996 by Jeffrey Hussey

Customer Base: Commercial, 95 percent; government, 5 percent.

Employees: More than 190

1999 Revenue to Date: $14 million

1998 Revenue: $4.9 million

Stock Symbol: FFIV, Nasdaq.

www.f5.com