No. of Recommendations: 30
Most of us are holding ZS. I have thought that the following comments from Palo Alto Networks could be important to us.

Their CEO Nikesh Arora spent some time to discuss ZS in their Q4 2019 Results and they think they are beginning to do well against ZS.

*******
In addition to product releases, we had several notable wins during the quarter. We displaced Symantec and Zscaler at a Fortune 50 U.S. retailer to secure their data center and network of more than 2000 retail outlets.

We displaced Zscaler and the Fortinet at a major European national healthcare provider in their digital transformation project.

You do notice that we're displacing your favorite company Zscaler and many situations.

We have our first over $10 million deal for Prisma access where as we highlighted we've displaced Zscaler. So feel very confident in our ability to keep building Prisma access as one of the future architecture for securing the cloud.

Yeah. I -- so I think the competition is Zscaler. However, I strongly believe that the right architecture and the right products at the end of the day win.

I don't know if you know, if Microsoft recommends that when you use Zscaler, you turn -- you don't use Zscaler when you go to Office 365. Why? Because it breaks Office 365. Because that's what proxies do. And it's their own technical solution and I strongly believe that the right technical solution will win.
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No. of Recommendations: 1
The comment is already reflected on the stock price, especially on a strong day.
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No. of Recommendations: 22
I don't know if you know, if Microsoft recommends that when you use Zscaler, you turn -- you don't use Zscaler when you go to Office 365. Why? Because it breaks Office 365. Because that's what proxies do. And it's their own technical solution and I strongly believe that the right technical solution will win.

---

Sounds like FUD from a competitor to me.
Does Splunk admit they are losing to Elastic?
Does any company ever admit they are losing to a competitor?
I hardly ever see a competitor's name readily mentioned in an ER...seems a bit desperate.

Can anyone find anything from Microsoft saying that zscaler doesn't work with O365?
A quick search just shows microsoft's own website touting Zscaler:

https://customers.microsoft.com/en-us/story/zscaler-kelly-se...
https://docs.microsoft.com/en-us/cloud-app-security/zscaler-...

Then you see stuff like this, from Zscaler website, which basically says "hey...O365 migrations can be complicated...make sure you do it correctly, or guess what, you will have problems"
https://www.slideshare.net/Zscaler/pitfalls-to-avoid-when-de...


I think we are seeing these high 30+ P/S multiples are not sustainable, and this was an opportunity to push down ZS stock a bit. ZS at $8b mkt cap is a better buy than ZS at $9b or $10b, if my napkin math is correct.

Dreamer
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No. of Recommendations: 4
Sounds like FUD from a competitor to me.
..
Does any company ever admit they are losing to a competitor?


PANW and ZS are competitors, the CEO is talking about specific instances where they won against ZS. Companies all the time talk about their competitors and how well they do against them. Sometimes, they compare their products, features, and in some cases, industry is growing x and we are winning X+% by taking share, etc... Nothing new.

BTW, the article you linked kind of validated PANW point that ZS implementation will break things and you have to take workarounds and PANW solution doesn't require these fixes. :)
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No. of Recommendations: 0
I am a newbie here and just purchased ZS about a week ago and now I'm down 13% on this Foolish "buy now" recommendation. This Motley Fool stock recommendation is not going well for me and I'm really scared.
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No. of Recommendations: 39
Zscaler is brought up 10 times in the PANW ER.

https://seekingalpha.com/article/4289778-palo-alto-networks-...

The PANW ER CC is an interesting read...I skimmed (day job) but very combative.
I believe they basically said "we get the market loves zscaler and SaaS, but we are not going to go that route" and then they bashed crowdstrike, zscaler, sd-wan...etc

Kudos to PANW CEO for not wanting to go down the NTNX rabbit-hole of declaring a full transition from hardware to software.

Apparently this was sort of an ER and Analyst day in one. Not positive, as I don't follow PANW ER's.

"Now many of you are so kind, you've written me very long notes about what do you want me to tell you, which we're going to make you happy. It's very helpful. Just like I have my marching orders you've given me the script. So Keith Weiss from Morgan Stanley, yes, we will talk about product evolution M&A. Keith Bachman talks about depth and duration of depressed cash flow stands very depressing, but we'll talk about that they're not depressed.

We will go down to the details of our next generation security business and explain the financial models around you, they don't get spooked by duration issues. And yes, Brad, no hardware company of this size have made a transition like this, but hopefully we just need to keep growing and not make the transition.

You do notice that we're displacing your favorite company Zscaler and many situations. So, but I'm scared today, we had changes or recommendations, something is going to happen to the rest of you guys. "

Nir, the CTO, is particularly combative...but often that is how a CTO is: very passionate about their architecture and their solution as being the best.

Talk to a NetApp CTO, and guess what, NetApp is the best. Talk to a Pure CTO or an HPE CTO or a DellEMC CTO...you get the idea.

PANW has been constantly pivoting for years now. They, like Cisco, viewed security as a networking problem. More large orgs are moving now to a setup where their DCs are shrinking, and they are more concerned about their remote sites (branch offices, plants, mills, factories) and how to leverage their data and to create more data, leveraging IoT at the edge. Data Analytics can be done at the edge (rather than sending back to main DC) and burst up to cloud from the edge. So the standard way of everything getting routed thru the main network and to the main DC is not how things are being done moving forward. So PANW pivoted to endpoint, and then they had to pivot to cloud-based security. They even admit on the call:

"I anticipate that there are a number of cloud security technologies that haven't been invented yet, but we will have to be thinking about. And we will continue to be very decisive and purposeful about building out this platform and continue to maintain its position as the most comprehensive solution."

So PANW is basically saying "hey...as security changes, we are the best to adapt cause we have a lot of experience and there are too many security vendors out there and customers want less security vendors in their environment to manage".

Not a bad argument, but it in no way negates Zscaler or Crowdstrike or Cisco or VMware+Carbon Black, etc...

Dreamer

Dreamer
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No. of Recommendations: 1
Welcome, but this is not for discussion on this board. Suggest you read the Rules of this Board, the Knowledgebase and associated articles to remind yourself why you brought the Company in the first place. Respectfully. Bran.
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No. of Recommendations: 1
It looks like it's time to play that game "How Well Do You Know Your Company?"

There's a lot of haters and imitators out there, envious of ZScaler. I imagine that will only get worse, and as a shareholder since $46 a share, I'm more than ready for it, waiting with a koolaide smile on my face for the next conference call.


Dominic
long ZS
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No. of Recommendations: 8
Hi Tzbbear,

Welcome to The Fool. I've been a Fool customer for 7 years now, with Stock Advisor and Rule Breakers.

I get your fear--you buy the rec and all it does is drop! Your fear is justified.

Here's the thing. Some of your stocks are going to lose. The sooner you embrace that, the sooner you are going to be further down the path of being a good investor. And its crazy! I bought Nvidia in January 2018--a great company that has had an amazing run up of over 1000% since the first Fool rec. I'm down 22% (not relative to the market, actually down 22%). I took a 33% loss on Celgene when I sold. I lost 38% on Clean Energy when I sold. I lost 87% in Celldex (no longer a rec).

You must be thinking I am a terrible investor--such losses! But since August 2012, I have averaged a 15.7% return per year. I did great with Mastercard, Amazon, Starbucks, and Activision. I still own and add to each of these. And they have more than compensated for my losses.

So two suggestions:

1. Focus on building a portfolio of 15 stocks built from your highest conviction ideas. Doesn't matter if you just get 5 shares of one stock, 23 of another. Buy at least 15, and know that you are going to be wrong about some of them (either in market terms of the timing you buy, or sell, or in terms of company fundamentals, where the company's actual success breaks down). That's the price of admission.

2. Don't allocate the same percentage of dollars to each. Put more money in stalwarts, less money in growth stocks like ZS. I would feel pretty differently about being down 13% in MA (which is an 11% allocation for me) than in ZS (which is a 1.7% allocation in my portfolio).

Tom
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No. of Recommendations: 4
Basically the competition is intense and companies are trying to differentiate with each other. If PANW is winning against ZS and bringing ZS out so many times, then it means they are going after ZS in the market place, it could be based on technology, based on PANW size vs ZS size (read it as install base strength) and lastly cost. If you notice PANW margins have gone down, so they could be competing on price also. One of the things that competition does is bring the price, margin down. While companies may be growing, if the margins started going down, the path to profitability gets pushed out, which will show up in stock price eventually.
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No. of Recommendations: 0
BTW, the article you linked kind of validated PANW point that ZS implementation will break things and you have to take workarounds and PANW solution doesn't require these fixes. :)



Huh...Errrr....which article? The Slideshare presentation (third link)? All the links seem to affirm ZS works better with O365 than with hardware solutions.

tj
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No. of Recommendations: 5
In addition to product releases, we had several notable wins during the quarter. We displaced Symantec and Zscaler at a Fortune 50 U.S. retailer to secure their data center and network of more than 2000 retail outlets.

We displaced Zscaler and the Fortinet at a major European national healthcare provider in their digital transformation project.

You do notice that we're displacing your favorite company Zscaler and many situations.


Hmmm...I'm not sure how to interpret this quote from their CEO (or CTO?). "Displace Zscaler"...as in the company had implemented Zscaler and then the company decided to go with PANW? Or does he mean that we won the client, out competing Zscaler (and other vendors like Fortinet and Symantec)?

My understanding is that once a company implements Zscaler (gets rid of all the hardware and all the people needed to manage the hardware), they are not likely to go back. No?

tj
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No. of Recommendations: 88
TJ,

Been spending the day crowdsourcing this issue with Palo and the conclusion (too long to get into all the details) is clear and blatant BS.

Palo is wrapping an acquisition they made into their architecture to be used where their appliances would otherwise not be used anyways in the meantime increasing complexity and cost and the need for more appliances.

Palo was blatantly untruthful in regard to the 365 Zscaler thing. 4 Pinocchios there. They drew on a 2017 blog about web proxies that never mentioned Zscaler nor bother to metion how Zscaler is integrated into 365 as its security of choice. But hey, if your a $2 billion a year company and you have to mentoin the name Zscaler (a tiny $300 million a year company) that often in an investor presentation, one has to wonder, why? Why so obsessed with such a small little player with an “inferio” product offering, and talk unsubstaniated trash about it at the same time?

I think most here know the answer to that.

Tinker
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No. of Recommendations: 27
Tinker,

Your insights and ability to drill into data is certainly an attribute missed in the Fool community.

Regards

Just a Fool
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No. of Recommendations: 16
I think Tinker has it right here. This report just confirms ZScaler's competitive threat.

However, I'm starting to question ZScaler's valuation based on the total market size. I could easily see MongoDB, The Trade Desk, and Roku eventually reaching 15b in revenue or more. But looking at Zscaler's industry, Palo Alto networks is the big dog, and they are only pulling in 2.75b in revenue ttm. At that run rate, they are trading at a p/s multiple of 6.87.

So if ZScaler reaches the size of Palo Alto Networks, and trades at a similar multiple at scale, they would be an 18.91b dollar company. That's barely a double in stock price from here.

So where's the opportunity? Is ZScaler going to be able to eventually sustain a greater operating margin than Palo Alto because of its cloud business model and therefore command a higher multiple? Is the security market growing at such a pace, that the tide is going to lift all of the boats to higher revenue?

It just seems that the potential size of Zscaler at scale is much less than the likes of MongoDB and The Trade Desk who are going after much larger markets.

I'm sure I'm not the only person who is wondering about this question...
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No. of Recommendations: 3
BobbyBe,

Zscaler's immediate opportunity is $17.7 billion (replacing all of the security hardware to their cloud service). Once companies are on their platform, they can expand by offering other services so that should greatly add to their current $18 billion TAM. They do have long road ahead.

tj
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No. of Recommendations: 33
BobbyBe,

However, I'm starting to question ZScaler's valuation based on the total market size. I could easily see MongoDB, The Trade Desk, and Roku eventually reaching 15b in revenue or more. But looking at Zscaler's industry, Palo Alto networks is the big dog, and they are only pulling in 2.75b in revenue ttm. At that run rate, they are trading at a p/s multiple of 6.87.

I think you ask a really important question that I'm not sure has an answer but I'll take a stab at it. PANW's revenue is peanuts in the grand scheme of cyber-security. Total spend is around 130 billion a year and it is growing in the 10-15% range a year. Cloud security is one of the fastest growing subsections. Of course ZS isn't going after all cyber-security spending so what is their piece of the pie? Back at their IPO the company mentioned they thought their TAM was around 17 billion dollars. I'm always hesitant to put much stock in a companies self reported TAM but network/application access /sandboxing/cloud is huge especially as more and more stuff moves online. The stakes are getting larger and the need to protect is getting larger.

Naturally ZS will have/has competition so it will not get anywhere close to all the spend. So far the competition hasn't shown up in a big way but I think we are in the very early innings.

Anyways all this is to say, the market is big and it is growing really fast, and so far we haven't seen any indication that Zscaler can't keep growing.

here are a couple of links that are helpful
https://www.gartner.com/en/newsroom/press-releases/2018-08-1...

https://cybersecurityventures.com/cybersecurity-market-repor...

best,
e
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No. of Recommendations: 3
Tinker,

My rudimentary understanding is Prisma Access (one of PANW product) is in direct competition with ZScalar. From the results...

And our performance in Prisma and Cortex or as we refer to them collectively as next-gen security was especially strong.

Our next-gen security billings were approximately $192 million in the quarter, this represents a $768 million annual run-rate to approximately and accelerated our growth to approximately 180% year-over-year."


Compare that to ZS revenue. Let us see what numbers ZS reports and where the growth rate is going to shake out for ZS. But take a second and let 180% y-o-y growth sink in on products that directly compete with ZScalar offering.

Why so obsessed with such a small little player with an “inferio” product offering, and talk unsubstaniated trash about it at the same time

Companies attack emerging competition is nothing new and irrespective of their strength they attack other competitors. And clearly from the remarks on the conference call, the investment community and analysts are concerned about PANW's ability to compete with emerging competition from ZS.

While you consider it as "trash" talk, market just rewarded PANW with a $1B raise in their market cap. I don't follow PANW so I am not sure whether the raise is due to something in their investor presentation, or in their latest results. I am just wondering whether market was worried about the emerging competition and today's results showing PANW can address the threat from Zscalar.
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No. of Recommendations: 72
Kingran, what Palo is selling is a hybrid product. The appliance less functionality only happens on the edge such as on SD-WAN installations where they would not use appliances anyways. Yes, in these greenfield opportunities they are competing.

But then again they are not. Zscaler sells transformations that remove appliances. Palo is selling extensions to its appliance architecture. Not much different from what Bluecoat was doing. Nothing changed w your Palo deployments w their offering. It is just an extension where appliances are not practical.

Palo has tens of thousands of heavily vested customers. I am sure they are going to town selling into that base. They will also win with companies that simply want an incremental improvement. Zscaler DOES NOT OFFER INCREMENTAL IMPROVEMENTS. You transform or go with someone else.

I with the help of many others have dug into this issue deeply. Palo has not had an investor’s conference in 2 years. Why now? Because their share price is falling and the market is concerned that Palo may go the way of Symantec/BlueCoat. That is why Zscaler was trashed at this meeting. So they can tell the world were not gonna be BlueCoated by Zscaler. And they probably will not be. They are a much better run company.

Look at what Palo said. They dissed “proxies” as the wrong solution (and absolutely lied about Zscaler and 365 - made an “inference” they would say I’m sure) and used the language of ROUTERS to explain their superior solution.

We know routers and switches as we followed Arista and Cisco. Lots of software involved BUT ALL THAT SOFTWARE RUNS ON HARDWARE USING A ROUTER SOLUTION.

Palo has to sell hardware or their business model (like Cisco’s) dies. If you want to keep your Palo investment w all the appliances and all it involves then Zscaler is not your first choice.

If you want to dump the appliances or make a strong transformative step to do so then Zscaler is your first and almost only real choice.

We dig some great digging on this. So yeah, they do compete but not necessarily in a straight forward manner. And the weaknesses of the Palo product mirror Cisco’s weaknesses vs Arista as an analogy. Except Zscaler’s solution is far more differentiated and paradigm shifting vs Palo than Arista was/is to Cisco.

Keep in mind Cisco was always the large market share leader through out due largely to their installer base and larger sales force.

On this case Zscaler, last number I read (from last year) had more than 55% marketshare in the SWG market and that includes against BlueCoat, Cisco, Palo, and everyone else.

There is a reason they singled out Zscaler and that is because that is whom their installed base and future customers are looking at when Palo comes to call. I fully expect Palo to have more revenue. They are selling an incremental continuous product into a very large vested customer base.

Zscaler is selling a less mature, totally disruptive product into green field opportunities with no large installed base to upsell into.

Is what it is and what it is, is not straight-forward competition. But one of the things a slack channel is made to help dig up.

Tinker
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No. of Recommendations: 1
Look at what Palo said. They dissed “proxies” as the wrong solution (and absolutely lied about Zscaler and 365 - made an “inference” they would say I’m sure) and used the language of ROUTERS to explain their superior solution.

Tinker,

My understanding is Zscaler uses proxy based architecture for their cloud based firewall, and that is just a fact and no lying there. Now, specifically for O365, access control policies for O365 apps are defined with Zscaler next-gen firewall, and BTW, that is based on "proxies".

Not sure why you think it is lying. I would be curious to ask ZS about this and see what they have to say. They do have an opportunity to address in their earnings call, let us see.

There is a reason they singled out Zscaler and that is...
I think this is battle for firewall market. ZS uses cloud based, "proxy" based architecture, firewall and PANW has installed base, and appliances that are installed on-premise market they have to defend to. I think we should not ignore, "prisma access". I think PANW, is not just defending their on-premise firewall's but attacking ZS with "prisma".
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No. of Recommendations: 34
Kingran, EXACTLY Zscaler uses proxies and Palo routers.

The lie is that Microsoft advises to turn Zscaler off when using 365. This derived from a more than 2 year old blog that does not mention Zscaler and only says “most” proxies. And yet Palo inferred this also means Zscaler, which it does not. That is a lie or an intentional misdirection.

This is the closest I can find to turn off Zscaler https://help.zscaler.com/zia/saml-scim-configuration-guide-a... and that is not turning off Zscaler.

Find substantiation for Palo’s comment that Microsoft advises turning off Zscaler when using 365. If you can find substantiation for this you will be doing all of us a great service.

All Microsoft advises, in a 2 year old blog is proxies should generally not be used w 365. Does not say that this means their featured and utterly integrated security partner Zscaler.

I will very much appreciate someone proving Palo correct.

Btw I remember getting blow back when I said Symantec’s troubles were
Zscaler focused as well. But you know, nothing to learn here.

Find something that shows Palo was not lying. I cannot find everything and if I missed it I really will appreciate being set straight. We all will appreciate this as that is what this forum is for.

Thank you.

Tinker
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No. of Recommendations: 25
Oh here we go, exact language Palo used today:

https://help.zscaler.com/zia/about-microsoft-one-click-optio...

And it does not say turn Zscaler off.

Let me know if this substantiates Palo’s comment that Microsoft recommends turning off Zscaler as it breaks 365.

Hint: it doesn’t. But this is what Palo wanted us to believe by their statement. Why does Palo need to put out such a “misdirection” trash talking
Zscaler?

What else that Palo is stating is misdirection or untruthful?

Tinker
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No. of Recommendations: 1
I with the help of many others have dug into this issue deeply. Palo has not had an investor’s conference in 2 years. Why now?

We grew our next-generation security business, Prisma and Cortex, by 89% this past year, which compares well with the 3 -- somebody calls them 3 horsemen or horse people or horse companies of security or the darlings. We're just envious of their valuations, so we feel compelled to compare ourselves with them.

There you go... :)
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No. of Recommendations: 4
https://help.zscaler.com/zia/about-microsoft-one-click-optio...

Wrong link. Did not clear my cache. This is the correct link.

No, Microsoft is not advising to turn off Zscaler to run 365 because it breaks it.

Tinker
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No. of Recommendations: 9
Last comment on it. Palo’s
statement is an absolute lie. The recommendation only goes to bow to properly set up Zscaler with 365 if you are not using 365 through your browser.

One has to further wonder why Palo was intentionally this misleading? Why? If their product is superior why not stick w integrity?

All’s fair in business I guess.

But yeah it’s a lie. So what else is Palo trying to sell us in this manner?

Tinker
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No. of Recommendations: 1
Tinker,

When Office 365 applications are used within a web browser
Basically to use ZS you have to forgo native apps and use them within Web-browser, which organizations don't like. To break-it in simple english, you will not be using desktop Outlook or skype, instead have to use browser based outlook and skype. I think that's a limitation.

Moving on...

Basically, to overcome what ZS has done is took the entire IP range for O365 and wrote an exception. Great, it works for O365. Now, is it truly scalable? Meaning, can you do this for all sorts of application? I don't know.

I don't think MS will say don't use ZS, but still insists you cannot use proxies and proxies cannot overwrite IP, or header, etc. Now, ZS basically created an exception for O365.
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No. of Recommendations: 2
But yeah it’s a lie. So what else is Palo trying to sell us in this manner?

I think PANW pointing that ZS architecture is based on "proxies" and proxies break O365. Now, you (Tinker is) are saying ZS basically written an exception for O365, or in other words, ZS is basically going to skip inspecting the SSL traffic bound to O365, remember the advantage of proxies, it allows ZS to inspect SSL packets, now ZS is going to forgo that for O365...

You are saying that is misrepresenting by PANW, but PANW is trying to make a nuanced point of that basically ZS firewall's selling point is unlike on-premise firewall, we can inspect SSL traffic, is broken for O365, or for any applications which doesn't want "proxies" to mess with its traffic.

You call PANW is misrepresenting, I think PANW is making a very nuanced point here. I will leave it here...
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No. of Recommendations: 5
If I sell my ZS now, it will go up. But if I hold or buy more, it will go down! That's the George Costanza rule. Better to laugh a bit and not worry too much.
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No. of Recommendations: 2
Kingran, aren't most cloud based apps web browser based? It seems o365 is one of the few exceptions. And if there are more that's only a way for zs to differentiate themselves from other proxy based security companies.
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No. of Recommendations: 0
aren't most cloud based apps web browser based?

Well... browser is by default the front-end for most modern applications and HTTP is the standard protocol... now, there are applications where you may not use either... to give a dump example, say I might host a FTP server... and I may not have to provide a browser or HTTP based access to it, but it may be very important from my enterprise point of view and I have to protect it... and my access policies are written such that, any tampering the URL or packet, which is what the proxy based firewall does, may compromise my access policies...

I know this is not a neat example... something I could think of on the fly...

The point is there are many applications that may not like the payload to be re-written... but the industry is moving away from that for scalability to SSL offloading...
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No. of Recommendations: 0
Well... browser is by default the front-end for most modern applications and HTTP is the standard protocol..

Outlook Anywhere runs on 443/HTTPS so I don't understand why ZS wouldnt support that. Are we sure thats accurate? Outlook has been able to support this for about a decade now.

-AJ
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No. of Recommendations: 8
AJ,

They do support that. As I said whopper from Palo. Read the link I posted a few posts ago about the one click set up option.

Zscaler is not a perfect solution. But it is the best solution for 365. Palo is literally trash talking Zscaler.

Tinker
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No. of Recommendations: 2
Palo’s statement is an absolute lie. ....But yeah it’s a lie. So what else is Palo trying to sell us in this manner?

Tinker,

Find below the paper from ZS on O365 deployment. Here is the statement from ZS " In compliance with Microsoft, Zscaler does not inspect Office 365 traffic"

https://www.zscaler.com/resources/solution-briefs/zscaler-fo...

This is the point I was making y'day. IF ZS's claim is they are superior than on-premise firewall because they can inspect SSL, etc. When it comes to O365 ZS is not doing any inspection. If my security software is not inspecting my data, why even use that firewall?

If I am the customer, Why would I buy a firewall product, which is not going to do any inspection? I think that question could become pretty significant for ZS to answer. At the least, Palo has raised a serious doubt in the minds of buyers or done a successful "FUD" as many love to call here.

For many customers, they are going to be okay with O365 traffic not getting inspected, but for really large enterprises, it creates a situation there could be other applications (read as applications that are hosted @ cloud providers, where the IP's could be significantly changing due to dynamic scaling, or due to using cloud provider resource such as load balancer's instead of fixed IP's) which will also be impacted.

I think so far ZS has not answered the issue convincingly.
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No. of Recommendations: 11
about the Costanza rule...if you are longer term long then you should sell a little bit so it will go up for the rest of your ZS holding, and you are going to make a killing. Just sell a tiny tiny bit to trigger the rise. The smallest % sold, the less remorse you will have that you didn't make the money on that part.

I think we are making much too much about what a competitor said. we should be more focused on how ZS can and will capture its market with the position it has right now.

It's funny how silent the board is about CRWD, ZM and SMAR that have just reported. These stocks are down big. Reports not good enough? decelerating growth? yeah right from triple digits growth it has fallen to only double! How silent it is in general when the highest flying SaaS stocks are dropping when the market is rising. Not sure if there is an appetite to buy more after such bruising on the concentrated portfolios we are talking about here.

Make no mistake about it. I think the businesses we are talking about here are just fine and doing well. But the market has decided to cut their valuation somewhat. In the shorter term a good portion of the returns in those high-flying SaaS have been their stretched valuation, and that could be taken away at any time and in a snap of the fingers. Is the party over for now?

tj
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No. of Recommendations: 47
One small example, at my current company. Small to midsize financial firm, 350 employees, @10 actual IT engineers and security admins support, 3 offices but 90% EEs concentrated in HO.

We had up until beginning of this year that classic network hardware and software to support. Routers, switches, ports to onpremise VMWare and dedicated servers, data protection SW, URL restriction management, threat detection, patching constantly.

All of that hardware, software and patching support gone. Replaced by ZS. All internet traffic is routed through ZS. Which is what our business wants - the last thing our business managers want to hear is how much money we need in staff and green $ to spend on managing routers & switches etc.
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No. of Recommendations: 0
All of that hardware, software and patching support gone. Replaced by ZS

So just to be clear, your company switched to ZS and got rid of all the routers, switches?
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No. of Recommendations: 6
Find below the paper from ZS on O365 deployment. Here is the statement from ZS " In compliance with Microsoft, Zscaler does not inspect Office 365 traffic"....I think so far ZS has not answered the issue convincingly.

Kingran,

That is a requirement for ALL security products, not just ZScaler.


"Deep packet inspection specifically SSL inspection - Skype for Business uses pseudo TLS which is used in media setup. This is not supported by most inspection devices such as proxies and firewalls, including host based security software; which is why we ask customers not to inspect Office 365 traffic."
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But it is the best solution for 365. Palo is literally trash talking Zscaler.

Tinker,

1) Zscaler uses proxies
2) Zscaler says they are not inspecting O365 traffic
3) The reason they are not inspecting O365 traffic is to comply with Microsoft, in other words, if they inspect the data then it will break the connection and will not work. In simpler words, if you want O365 to work, then you have to bypass ZS firewall and not inspect the traffic.

Which of this you disagree, or consider as lie or "trash talking"? Why avoiding inspecting the O365 traffic is the best solution? If that is the best solution every product can offer the best solution, all they have to do is "NOTHING", why would a customer pay to ZS to do "NOTHING"?

What am I missing?
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What am I missing?

You're missing that ZScaler does not inspect O365 traffic not as a weakness of ZScaler, but due to Microsoft's request that NOBODY inspect O365 traffic.
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NOBODY inspect O365 traffic.

I am not sure about "NOBODY", I understand ZS cannot. There are NW/ security products that do work with O365. I am purposefully avoiding PANW here, so that we can focus on the issue with ZS and O365.

See blog post, that discusses this bit more in details.

https://www.bitglass.com/blog/using-third-party-network-devi...
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No. of Recommendations: 24
Bought a bunch more ZS yesterday and today.

Still not cheap, but well off highs thanks to FUD and nothing else.

3 catalysts in front of stock now:

1. ER on Tuesday 9/10.
2. On 9/17 they will have analyst day onsite of their annual Zenith Live conf.
3. Likely new solution announcements coming from the Zenith Live conf.

They will have ample time to clap back at the FUD, likely in a high-road manner of a winner/leader, over the next 10 days or so as a result.

Not sure there was a need to bury this thread in tech nuances. They have giant clients - i know one personally - and if clients had real and pervasive issues w their solution you would hear about it.

Much like storage admins dont want to lose their jobs due to HCI displacing their traditional storage, or like ntwk admins may not like SDN implementations, the legacy security teams are friends of the PANW and CSCOs of the world and are threatened by the cloud-based security direction zscaler heralds.

Adapt or die in this new era of cloud and edge infrastructure being of greater strategic importance to all large orgs over traditional DCs. PANW knows this and is thrashing out.

I didnt need a crowd-sourced slack group to see this was just simple FUD.


Dreamer
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It is interesting to see any commentary that is not flattering is dismissed as FUD. Setting aside that, saying people are supporting or buying "PANW" because they are worried about their jobs is not FUD?

One issue may not be a deciding factor when a company makes a decision to go with ZS. I think we all get that, but terming that as a "lie" or FUD, is incorrect either.

Cheers,
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No. of Recommendations: 7
are threatened by the cloud-based security direction zscaler heralds. The higher up they are, the more experience they have with the old ways, the more these people will resist having all those skills devalued by any new tech that is disruptive. That is simple human nature.
But from a market standpoint, Wall Street finally started buying SaaS stocks a year or more after many of us here did. Now they too have some profits and are probably selling because of risk off or more likely because they want to deploy the money into something more more familiar, stocks that can be analyzed by looking backwards, stocks driven down in price by trade war talk.
Has anything changed fundamentally with these stocks? As far as ZS goes, wait a few days, the quarterly report will tell the true story
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No. of Recommendations: 35
Still not cheap, but well off highs thanks to FUD and nothing else.

Something else is that SaaS stocks are well off their recent highs while the overall market (SP500) is still close to an all time high:

ZS: -28%
SMAR: -27%
CRWD: -26%
MDB: -23%
TWLO: -17%
OKTA: -14%
ESTC: -14%

So it’s inaccurate to say that ZS’s stock drop is only due to FUD.


3 catalysts in front of stock now:

1. ER on Tuesday 9/10.
2. On 9/17 they will have analyst day onsite of their annual Zenith Live conf.
3. Likely new solution announcements coming from the Zenith Live conf.


Yes we will see in the next weeks but lately even very good results and good guidance have not been enough to increase and hold up SaaS stock prices.

Chris
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Something else is that SaaS stocks are well off their recent highs while the overall market (SP500) is still close to an all time high:

ZS: -28%
SMAR: -27%
CRWD: -26%
MDB: -23%
TWLO: -17%
OKTA: -14%
ESTC: -14%

Good macro observation Chris. A contrarian might see this as a buying opportunity, while others may see it as the end of a good run.

It is impossible to decipher investing crowd mentality, but a couple of possible macro thoughts on this might be:

- Risk off recession fears; recessions punish the highest valuation multiples the most, and recession chatter peaked in August after many of these issues reached 52-week highs in July.

- Opportunistic profit taking; cash out the biggest winners and cycle into issues hammered in August. A lot of tech stocks and manufacturers got savaged in August, so they may look attractive for a rebound, especially if the economy is not going to falter.

- Tariff war cycle; Tariff rhetoric sent a lot of importers off a cliff, and they look like bargains if the trade war cools down, so investors may be cashing out high risk winners (many of our SaaS stocks are not closely correlated to the tariff war), to scoop up beaten down tariff victims.


ZS, TWLO, SMAR, and ESTC are all flirting with the 200DMA, which may well be seen by institutional investors as key support. For chart traders this pattern may be just the right spot to enter for the next leg up.

ESTC dropped briefly below the 200DMA a couple of weeks ago going into earnings, and then quickly rebounded and bounced off the 200DMA again.

I'm not trying to read tea leaves, I'm just thinking out loud some possible scenarios, which may be nothing more than the musings of a mental aneurysm.
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