This week, F5 Networks announced delightful Q1 financial results to Wall Street. Company revenue was up 11%, topping Wall Street estimates; the company hired nearly 100 new employees; and F5 now has a market cap in excess of $4 billion. Share price actually jumped 3% after the announcement.

These results say a lot about F5 Networks, a leader in the Application Delivery Controller (ADC) market staffed by a bunch of smart people who are also pretty fun to hang out with. In my opinion, however, these results suggest a few other market trends:

1. Investments in data center consolidation, SOA, and web applications remain signficant. F5′s core ADC sales accounted for 93% of its total revenue. Yes, BigIP/TMOS/Viprion is F5′s strongest product set, but the numbers also suggest that purchasing in the Internet data center continues to be very strong.
2. Big web applications are becoming ubiquitous. Enterprises are now building the type of scalable web applications that used to be the exclusive domain of folks like Amazon, eBay, Google, and Microsoft.
3. ADCs are part of the web application infrastructure. It used to be that ADCs were thought of as load balancers in the networking domain, but no longer. With features like iRules, protocol acceleration, caching, and security, ADCs are being used to reduce business risk, improve the user experience, and enhance application business logic.
4. ADCs and WAN Optimization are coming together. As Internet-facing applications span multiple data centers, there is a whole lot of application-layer data center-to-data center activity going on (i.e., global load balancing, file transfers, VMotion, etc.). These requirements unify ADC and WAN optimization functionality, which plays well for vendors like F5 with supercomputing-like processing capbility at the data center network edge.
5. IT needs new networking/application specialists. F5 financial results and the whole evolution of ADC functionality suggest the need for a new IT skill set. I believe there is a growing requirement for hybrid IT specialists who understand both networking and application requirements. These people will become architects and application performance gurus — and make a ton of dough. F5 should work with application vendors like Microsoft or Oracle to create a certification program in this area.
6. Whither Cisco? I know I’ll get some grief from San Jose, but it seems like Cisco continues to lose focus on the ADC market as it has in security. I know others like A10 Networks and Citrix are doing wel in the ADC market as well so I don’t get what’s going on. My guess is that Cisco has a next-generation product in the works, but until this hits the streets, it seems like Cisco is losing more than it is winning.

Congratulations to F5 for its innovation, focus, and sales execution. Others should take notice: new Internet data centers are clearly where the action is.

Related posts:

1. F5 Shakes Up the Firewall Market
2. Kudos to 60 Minutes, F5 Networks, and HP
3. Dell and Force10 Networks: What it Means
4. Big Network Security Investments –And Market Opportunities — Ahead
5. The Cisco Squeeze

Tags: ADC, Application Delivery Controllers, Cisco Systems, Citrix, F5 Networks, WAN Optimization