Shares in US cybersecurity firm Fortinet (FTNT:NASDAQ) plunged 18% after disappointing both on revenue and on the outlook with its third quarter update.

Fortinet has 680,000 global customers and sells a complete cybersecurity package on a subscription basis. This includes firewalls and risk-detection tools.

Although you would expect strong demand given the growing importance of businesses protecting data online, customers are not spending as much as expected. Billings (how much the business has invoiced from clients) were up 6% year-on-year in the period to
$1.49 billion – below the forecast $1.59 billion. This fed into quarterly revenue of $1.33 billion against an estimated $1.35 billion.

For the fourth quarter Fortinet anticipates revenue of $1.38 billion
to $1.44 billion – short of the expected $1.5 billion, with billings
of $1.56 billion to $1.7 billion compared with the $1.91 billion pencilled in by analysts.

Fortinet’s announcement of a company restructuring to focus on its core growth areas reflects how disappointing the numbers were.

The timing is awkward for fund manager Terry Smith who recently added the stock to his popular fund Fundsmith Equity (B41YBW7). It was already a holding in sister vehicle Smithson (SSON). [TS]

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