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Ken Xie, founder and chief executive of US-based network security company Fortinet, sees significant opportunity ahead in the cybersecurity market. Photo: K Y Cheng

Chinese-born brothers build billion dollar fortunes in Silicon Valley with network security software firm Fortinet

  • Chinese-born brothers Ken and Michael Xie are now billionaires from their stakes in cybersecurity firm Fortinet

Cybersecurity has unlocked riches for Ken and Michael Xie. The Chinese-born brothers are now billionaires from their stakes in Fortinet, the Silicon Valley-based network security software firm they co-founded almost two decades ago, according to the Bloomberg Billionaires Index.

Spurred by high-profile data breaches and malware attacks, cybersecurity has become a growing priority for companies.

Cloud-focused firms, including Fortinet and Palo Alto Networks, have benefited as businesses update their computer infrastructure, posing a threat to more established network security providers such as Cisco Systems and Juniper Networks. Fortinet counts most Fortune 500 companies as its customers, according to its website.

“It’s been one of the innovative companies for next-generation products as companies have looked to cyber more,” said Mandeep Singh, senior technology analyst at Bloomberg Intelligence. “It’s a fragmented market, so there’s plenty of room for a player to boost their position.”

The cybersecurity software market should grow 10 per cent a year through 2023, according to research firm MarketsandMarkets. Fortinet is outpacing that, with 2018 revenue increasing 20 per cent to US$1.8 billion from a year earlier.

Fortinet’s shares closed at US$81.22 on Wednesday, more than six times its 2009 public offering price. The stock dipped on Thursday after fourth-quarter adjusted profit missed analysts’ estimates.

“We are excited about significant opportunity ahead,” Ken Xie, 56, who is chief executive, said on a call Wednesday after Fortinet reported results. He predicted continued growth this year, but added “you need to keep up the innovation”.

A spokeswoman for Sunnyvale, California-based Fortinet declined to comment on the brothers’ net worths.

Ken Xie has been a US citizen since 1998 and started his first cybersecurity company while studying electrical engineering at Stanford University. He co-founded Fortinet in 2000 after creating and then leaving another online security firm, NetScreen Technologies. Juniper Networks acquired NetScreen in a 2004 all-stock deal valued at US$4 billion.

A decade and a half later, Fortinet’s US$13 billion valuation exceeds that of Juniper Networks. Ken Xie is the largest individual shareholder, with a 7.4 per cent stake worth US$1 billion. He has also collected more than US$40 million through share transactions, according to data compiled by Bloomberg.

Michael Xie, the firm’s president and chief technology officer, studied electrical engineering at Canada’s University of Manitoba. He owns a 7.1 per cent stake, with almost half held through family trusts, and has collected more than US$70 million through share transactions.

Among other cybersecurity companies, Check Point Software Technologies chief executive Gil Shwed has a US$2.9 billion stake and Palo Alto Networks co-founder Nir Zuk’s shares are worth almost US$300 million.

“It’s a space that keeps changing and growing fast, keeping me learning every day,” Ken Xie said in an interview last year. “And that, I like.”

This article appeared in the South China Morning Post print edition as: Chinese brothers latest Silicon Valley billionaires
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